Davenport, the top-ranked women's tennis player in the world and defending champion, lost to Williams in the title match at Wimbledon earlier this summer. She is hampered by a lower back strain.
"I feel this is my hometown tournament and one in which I have always looked forward to playing," Davenport said. "My back is just not ready yet for competition. I look forward to returning next year and trying to regain my title."
Williams, ranked seventh, has been slowed by an ankle injury.
"We are certainly disappointed to lose players of the stature of our defending champion Lindsay Davenport and our other local favorite, Serena Williams, but we understand the need for each of them to focus on recovering," said tournament director Bill Peterson in a statement.