Williams pulled out of the Stanford tournament because of the injury
Serena Williams pulled out of the East West Bank Classic in Los Angeles on Tuesday because of a left knee injury.
After testing the injury in practice, the 26-year-old withdrew, joining sister Venus, Lindsay Davenport and Svetlana Kuznetsova on the sidelines.
The American's place in the draw is taken by British number four Melanie South, a lucky loser from the qualifying tournament.
South will meet the Czech Republic's Petra Kvitova on Wednesday.
It will be the 22-year-old's sixth top-level match of the season.
Williams will now focus on recovering her fitness in time to take her place on the US Olympic team in Beijing.
"It's a huge disappointment for me to be unable to play the East West Bank Classic in my hometown of LA," said Williams, who withdrew from Saturday's semi-finals at Stanford after injuring her knee.
"I've been getting intensive therapy and doing everything in my power to get my knee in shape for this week, waiting until the last possible moment to see if I could play.
"Unfortunately, after hitting this morning, I knew that wasn't going to be ready for this week."
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On court on Tuesday, third seed Anna Chakvetadze thrashed Poland's Marta Domachowska 6-1 6-1 to reach the third round.
"I played very well," said the world number eight. "I concentrated all match and overall, it was excellent."
However, sixth seed Daniela Hantuchova was beaten 6-2 6-4 by Olga Govortsova of Belarus in the day's other second round match.
Hantuchova is recovering from a long-term foot problem.
"I guess it's going to be a long way back," said the Slovakian.
"I'm struggling to find my rhythm and it was a bad performance."
Canadian Aleksandra Wozniak came back to earth with a bump as she crashed out 6-1 6-0 to Italian 10th seed Flavia Pennetta.
Wozniak won her maiden tour title at the Stanford Classic on Sunday.