Sun was expected to be one of the big attractions for the tournament in Auckland, but said an injured wrist had not recovered in time.
"Definitely not the way I wanted to start the new year but since Guangzhou I have been struggling with a wrist injury following a neck injury," the 24-year-old said in an Instagram post.
"Not being able to have a proper pre-season and being injured left me no choice to sadly withdraw.
"My team and I will start preparing the best to be able to compete at the Australian Open. Hope to see you guys at AO."
Sun has not played since reaching the final of China's Guangzhou Open in October last year.
Attempting to become the first New Zealander to win a WTA Tour-level singles title since Marina Erakovic, in Memphis in 2013, she was beaten 7-6 6-2 by American second seed Ann Li.
When her entry for the Auckland tournament was announced in September, Sun enthused about returning to play at home.
"This means everything to me. I get to play in front of a home crowd and fans. It is going to be energising and it's going to be fun," she said.
"I am biased, but it is pretty much my favourite tournament of the year."
Sun is rated at No 90 on the WTA ratings, which puts her in the main draw for the Australian Open which begins on January 12.
Play begins in the tournament tomorrow. The draw is headlined by Ukrainian Elina Svitolina and American Emma Navarro, who have world rankings of 14 and 15, respectively.
Venus Williams, who has won seven Grand Slam singles titles, returns to Auckland for the seventh time as a wildcard player.
The 45-year-old has not played since the US Open when she and Layla Fernandez made the quarterfinals in early September.
A wildcard has been awarded to Kiwi player Monique Barry. Ranked 258 in the world, she will also play in the doubles with compatriot Elyse Tse.
American Sloane Stephens and Briton Katie Boulter also have been granted wildcards.
Tse and fellow Kiwi Aishi Das attempted to gain entry to the main draw through qualifying but were both beaten by more experienced opponents yesterday.
Das lost 6-3 6-4 to Veronika Erjavec from Slovenia, while Tse lost 6-0 6-1 to Sofia Costoulas of Belgium.
Tournament organisers said yesterday that Williams and Svitolina would play together in the doubles.
Tse will team up with Barry in the doubles.
Erin Routliffe and her new partner Asia Muhammad are the top seeds.
Routliffe and regular partner Gaby Dabrowski announced their split in November last year.
