The 36-year-old Serbian lost a thrilling five-set Wimbledon final to Spain’s world number one Carlos Alcaraz a week ago.
“I have always enjoyed my time in Canada but after speaking with my team we believe this is the right decision to take,” said Djokovic, who has won the tournament four times.
“I really hope I can return to Canada and Toronto in the coming years to play in front of great fans there.”
American Christopher Eubanks will replace 23-time Grand Slam champion Djokovic in the main draw.
The ATP 1000 event will be played from August 7-13.
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