Sharpe's withdrawal comes as a major blow to the Wallabies who will play Tests against New Zealand, England, Ireland, Scotland and Wales in consecutive weeks, as well as midweek clashes against Gloucester and Cardiff.
"I hurt it against New Zealand in Sydney so it's been six weeks and it just hasn't settled down unfortunately," a dejected Sharpe said.
"It's not a muscular injury so it obviously needs some corrective surgery, it's a mechanical injury.
"I gave it as best a shot as I could to get on the tour but it didn't work out."
Sharpe, Australia's premier lineout forward, trained with the extended Wallabies squad yesterday in a desperate bid to prove his fitness.
But it wasn't to be with the veteran quickly informing coach Robbie Deans he was unfit to tour at the conclusion of the session.
"I've just been trying to manage it and get it right for this trip," he said.
"Some things that I was doing there's no problems at all but other things (I couldn't do) basically (through a) lack of strength.
"There's no point going on a tour like this and being a passenger ... I'm only going to let the rest of the guys down.
"I can't lift in lineouts and that's a pretty big composition of what I do in the game and coupled with the other set-piece scrummaging and also tackling, it's too much of a liability to be involved.
"It didn't really improve over the last three or four weeks so I knew it was going to be a bit of a stretch coming into this camp but I certainly wanted to give it a good crack but it just didn't work out the way I'd have loved it too."
Coach Deans conceded Sharpe's absence is less than ideal but challenged players on the fringes of selection to step up in his absence.
"It's obviously an area where we're not over endowed with depth so it is a blow," Deans said.
"But I guess the good thing for him now is he can go and get the operation and it won't impact him in terms of Super rugby and going forward.
"It would have been nice to have had him there but it's an opportunity for someone else now."
Meanwhile, rising Western Force winger Nick Cummins has also been ruled out of contention for the 35-man squad to be named tomorrow with a foot injury suffered at training.