Reuben Te Rangi is set to undergo immediate knee surgery that will require a six-week layoff.
He suffered the injury in the NBL final four while playing for the Wellington Saints.
Tests have since revealed cartilage damage.
Te Rangi's injury follows that of veteran forward Mika Vukona, who withdrew with a knee injury on Tuesday.
A 1.98m swingman, Te Rangi offers a well-rounded skill set and has been a key contributor to the Tall Blacks in recent years.
He was still in shock at the news and upset not to be playing.
"This team and singlet means so much to me and after all the hard work over two years in qualifying, it is a really tough thing to come to terms with.
"I will be right behind the boys and I know they will give their all in China, but right now I am not going to lie - this hurts."
Coach Paul Henare said Te Rangi's loss would hurt the team beyond just losing his playing ability.
"We have lost another one of our leaders, on and off the floor," Henare said.
"Reuben's development over the past few years has been immense and his role in this group was without question.
"His greatest strength has been his versatility and ability to contribute at both ends of the floor. We are going to miss his presence for sure in China.
"But we will look to our depth in the group to cover his absence and this presents an opportunity for someone else to step up and take on that responsibility.
"While you never wish these situations on any player, this is the scenario we have been preparing for in a way, with so many players exposed to international basketball over the past couple of years."
The Tall Black will name a squad of 14 on Sunday to head away on their World Cup build-up tour. The World Cup begins on August 31.
