The 30-year-old has now gone through a second successive campaign without adding to his majors collection.
The 30-year-old has been plagued by physical problems and has now gone through a second successive campaign without adding to his majors collection.
A left wrist injury forced him to withdraw from the French Open before the third round and kept him on the sidelines until the Olympics.
"It is no secret that I arrived to the Olympic Games short of preparation and not fully recovered, but the goal was to compete and win a medal for Spain. This forced recovery has caused me pain since then and now I am forced to stop and start preparing the 2017 season," Nadal wrote on Facebook.
Nadal, ranked at six in the world, suffered a shock second round defeat to Victor Troicki at the Shanghai Masters last week.
But he had been due to play in Basel next week and then the Paris Masters. He was also well-placed to qualify for the season-ending ATP World Tour Finals in London.
"I am very saddened for not being able to play next week in Basel since I have a great memory of the tournament and the final played against Roger Federer last year," added Nadal.
"I won't be able to compete either in Paris-Bercy, where the crowds and the staff have always treated me so well. Now it is time to rest and start preparing intensively the 2017 season."
Nadal compiled a 39-14 match record during 2016, winning titles at the Monte Carlo Masters and the Barcelona Open.
But he was a first round loser at the Australian Open and saw his hopes of a 10th French Open ended by his troublesome wrist which also ruled him out of Wimbledon.
At the Rio Olympics, he won doubles gold with close friend Marc Lopez but was beaten in the bronze medal singles play-off by Kei Nishikori.
He then suffered a fourth round loss at the US Open, going down in five sets to Lucas Pouille of France.
Nadal's longtime rival Federer, the holder of a record 17 Grand Slam titles, called time on his season in July after suffering a knee injury.
Both men were in Mallorca on Wednesday to oversee the opening of Nadal's own tennis academy.
"Roger and I haven't forgotten how to play tennis and we are working to get back to competing at the highest level," said Nadal.
"I still have many years to come in tennis."
His decision to call time on his season means that the year-ending World Tour Finals will be without both Federer and Nadal for the first time since 2001.