Pearson, 29, who won gold at London 2012 and silver at Beijing 2008, suffered the injury in training.
"Unfortunately, it is the biggest sporting event in the world that I am going to be missing out on," Pearson told Australia's Nine Network.
"It's devastating that I can't be at Rio as the Olympic champ."
Australia's track and field captain only returned from injury in June but has struggled for fitness.
The 2011 world champion missed the end of the 2015 season after shattering her wrist competing in Rome.
The athlete has had trouble with track times since her return and finished last at Norway's Diamond League event earlier this month.
The Australian Olympic team's chef de mission, Kitty Chiller said earlier: "It is just such a shame for a fantastic champion, a fantastic fighter and if she doesn't run in Rio I'll be very, very sad for Sally and the team."
In a blog post on 18 June, Pearson described her "exhausting" training regime to get ready for Rio and reflected on the "broken bones, torn calf, degenerative Achilles and hammy problems" that she has suffered from in the past 12 months.
