The 29-year-old ski racer made the announcement Tuesday through a post in her Facebook page.
"I am devastated to announce that I will not be able to compete in Sochi. I did everything I possibly could to somehow get strong enough to overcome having no ACL but the reality has sunk in that my knee is just too unstable to compete at this level," she wrote.
"I'm having surgery soon so that I can be ready for the World Championships at home in Vail next February," she continued.
Vonn ended her message on a "positive note" claiming her absence would open up "an additional spot so that one of [her] teammates can go for gold."
"Thank you all so much for all of the love and support," she wrote. "I will be cheering for all of the Olympians and especially team USA!"
Vonn partially tore a ligament in her right knee in November when she fell during a training run on the downhill course at Copper Mountain, Colo. While speaking to the Today show after the incident, the Olympic Medalist said she "was confident" that she might make it to the 2014 Winter Olympics in Sochi, Russia.