Aru was set to challenge defending champion Vincenzo Nibali for the pink jersey.
Aru, who was set to challenge defending champion Vincenzo Nibali for the pink jersey, crashed and hurt his knee while training in Spain last week.
He was diagnosed with an injury which "causes pain when he pedals", according to a statement by Astana and had left him with little chance of fully recovering in time for the May 5 start.
"As a consequence of his fall happened 8 days ago while training in Spain... Fabio Aru was examined this afternoon in Milan by Professor Franco Combi," said the statement.
"Aru will have to respect 10 days of total rest and therapy. On April 20 he will undergo further examination to assess the evolution of the situation.
"Given the circumstances, Astana Pro Team has decided to announce that, unfortunately, Fabio Aru will not participate to the Giro d'Italia 2017."
The loss of Aru is a major blow to race organisers RCS, who were hedging on an Italian dual between him and fellow islander Nibali, who hails from Sicily, over an epic three weeks.
Aru, the 2015 Tour of Spain champion who finished third in the 2014 edition of the Giro and second in 2015, said: "I'm so sorry and disappointed for what's happened: I was dreaming of starting the Giro in Sardinia, we've been preparing the race for months.
"Unfortunately, the accident happened and it means I can't be at the start in sufficient condition. Albeit with great regret, we are forced to give up."
Two-time winner Nibali, who won the Tour de France in 2014, is not short of opponents, however, with Colombian climbing specialist Nairo Quintana and several other podium hopefuls set to test his credentials in the May 5-28 race.