The Braddan racer suffered a broken arm after falling off his mountain bike.
The 28-year-old, who also missed the North West 200, has been ruled out after the TT medical team decided his injury had "not healed sufficiently" to allow him to ride.
Kneen said: "I tried everything to get myself fit for the TT but unfortunately time is just not on our side."
Team principal Tim Martin said it was "correct decision no matter how disappointing", but has yet to announce whether anyone will replace Kneen for this year's event.
First practice takes place on Saturday.
Kneen added: "Everything was going perfectly up until the injury, the bikes were superb and I really had a chance of a result but it just wasn't meant to be.
"My focus now is on completing my recovery and bouncing back at the Southern 100."
"To miss the TT is especially hard to take as a Manxman as I am sure everyone can appreciate."
Manxman Dan Kneen will not compete at this year's Isle of Man TT, his Mar-Train Yamaha team has confirmed.