The US veteran also withdrew from this week's event in Cincinnati, meaning she will join her sister Serena in missing the two top tuneup events for the year's final Grand Slam tournament that begins August 30 in New York.
"The pain that I am experiencing in my knee has unfortunately not gone away," Williams said in a statement issued by tournament officials.
Venus Williams would have played in Montreal for the first time.
Instead, the seven-time Grand Slam champion has not played a top-level singles match since she was ousted from the Wimbledon quarter-finals by 82nd-ranked Tsvetana Pironkova of Bulgaria on June 29.
The only remaining US Open tuneup event possible for either Williams sister would be at New Haven in the week before the US Open.