Nadal racked up a record-equaling sixth French Open beating his rival in four sets on Sunday.
"After talking with my team this morning, I feel that it is too big a risk to take a chance and aggravate it before Wimbledon," said the five-times Halle champion in a statement to tournament organizers who were left fuming.
"All the plans throughout the year were almost exclusively focused on Roger's start here," said tournament director Ralf Weber. "He also never indicated that there could be health problems there. I made my disappointment clear to his management."
The small Halle event is seen as a lower-key Wimbledon preparation event than the Queen's Club tournament in London.
(Writing by Karolos Grohmann; Editing by Ed Osmond)