The Australian played his first tournament since October in Stuttgart last week after undergoing surgery on his left knee in January.
But he complained afterwards about feeling inhibited during a first-round loss to China's Wu Yibing and has made the decision not to play in Halle.
"Very unfortunate news that I won't be able to compete at Halle this year," Kyrgios said in a video on the tournament's Twitter feed.
"I'm still dealing with a couple of things in my knee, just trying to give myself the best opportunity to compete at Wimbledon. As you all know, that tournament means a lot to me and I just want to do everything right by my body.
"I didn't want to go out there and not give you the same performance I gave last year. So hopefully next year I'll be healthy enough to play."
Kyrgios enjoyed the best season of his career in 2022, with the highlight a run to his first grand slam singles final at Wimbledon, where he was beaten by Novak Djokovic.
When the 28-year-old announced he would need to go under the knife on the eve of the Australian Open, it was hoped he would only be out for a matter of weeks and the fact he is still experiencing problems is a real cause for concern.
After losing in Stuttgart, Kyrgios wrote on Twitter: "Be patient with me my fans please... It's a process to get back to where I was. I know it's hard for you to see me perform like today, but I need more time and hopefully can get back to where I was."