The Spaniard has been dogged by the problem for several years as a result of his all-action style and love of playing on clay courts.
He admitted pulling out was the toughest moment of his career but said that he is convinced he can return better than ever.
“I had physical problems in two of the most important tournaments for me, Roland Garros and Wimbledon, so it is tough to accept for me,” Nadal said.
“I am going to work very hard to come back as soon as possible and when I do, I want to come back with 100 percent right both mentality and physically.
“One of the big problems now is that when I am playing, I am thinking more about the knees than the game. It is difficult to play like this. I want to come back feeling 100 percent.
“It is not a chronic problem. I can recover for sure.”
Ending Federer’s five-year reign as Wimbledon champion had been a crowning achievement for Nadal, who already had four French Open titles on his CV.
But Federer has already taken over as French Open champion and now he is the firm favourite to regain the Wimbledon title as well.
Australian Open champion Nadal, the fourth man not to defend the Wimbledon crown in the modern era, was desperate to fight for the trophy but he acknowledged there was no way his knees would have stood up to two weeks of gruelling action.
“When I enter a tournament like Wimbledon I want to try to win but my feeling right now is that I am not ready to win,” he said.