The 27-year-old, controversially omitted by Marcello Lippi four years ago, has not fully recovered from the knee injury he suffered in January.
The Fiorentina striker was given a last-ditch opportunity to play his way into Prandelli's squad in the friendly against the Republic of Ireland on Saturday.
But he failed to make an impact in his 71-minute run-out, and the Italy coach is taking no risks over his fitness for the showpiece in Brazil.
Rossi was the leading scorer in Serie A until picking up a knee injury which sidelined him for four months.
Prandelli has instead opted to include Napoli forward Lorenzo Insigne alongside Mario Balotelli and Ciro Immobile, who finished the season as Serie A's top scorer with 22 goals.
Parma's veteran striker Antonio Cassano will at last make his World Cup debut at the age of 31, while Torino forward Alessio Cerci is another attacking option.
AC Milan midfielder Riccardo Monolivo misses out after it was confirmed he suffered a broken leg in the goalless draw with the Republic of Ireland, and his place goes to former Liverpool flop Alberto Aquilani.
Roma's Daniele De Rossi and Juventus playmaker Andrea Pirlo will spearhead a formidable midfield along with Paris Saint-Germain duo Marco Verratti and Thiago Mott.
Juventus provide most of the defence with Andrea Bazagli, Leonardo Bonucci and Giorgio Chiellini all likely to start in front of club captain Gianluigi Buffon.
Torino right-back Matteo Darmian impressed on his debut against Ireland and has been preferred to Cristian Maggio, who endured an injury-ravaged season for Napoli.
Italy take on England in their Group D opener in Manaus on June 14.
Goalkeepers: Gianluigi Buffon, Salvatore Sirigu, Mattia Perin.
Defenders: Ignazio Abate, Andrea Barzagli, Leonardo Bonucci, Giorgio Chiellini, Matteo Darmian, Mattia De Sciglio, Gabriel Paletta.
Midfielders: Alberto Aquilani, Antonio Candreva, Daniele De Rossi, Claudio Marchisio, Thiago Motta, Marco Parolo, Andrea Pirlo, Marco Verratti.
Forwards: Mario Balotelli, Antonio Cassano, Alessio Cerci, Ciro Immobile, Lorenzo Insigne.