The horse, Toytown, was injured during training.
A reserve rider and horse combination will be selected by the British Olympic Association.
The 26-year-old Phillips had been among five riders selected to the equestrian eventing team by the BOA. Her withdrawal was announced Wednesday.
Phillips won the individual gold on Toytown at the World Equestrian Games last year in Aachen, Germany.
Her father, Mark Phillips, won a gold medal in the three-day event at the 1972 Munich Olympics. Her mother, Princess Anne, won the European title in 1971.
[Associated Press]
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