The former Manchester City striker missed the Azzurri training session on Wednesday after feeling a strain in his left leg. It later emerged that he had strained his left thigh.
Balotelli, 23, had the problem assessed at a local hospital where doctors confirmed that he could not take part in the match in Copenhagen.
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Earlier, national coach Cesare Prandelli was criticized for selecting Balotelli as he picked up a club ban for threatening referee Luca Banti during AC Milan’s game with Napoli.
Prandelli meanwhile defended calling up the fiery forward and pledged not to give up on him.
Balotelli has been Italy’s go to man under Prandelli and has scored 11 goals in 26 appearances for Italy, including 2 goals in the Euro 2012 Semifinals against Germany.
Italy has already qualified for next year’s tournament in Brazil, while Denmark hopes to remain in contention for a playoff spot.
After the match in Copenhagen, Italy hosts Armenia in Naples on Tuesday.