Ferguson felt pain in his right foot after bowling in Sunday's warm-up match against Afghanistan and an initial medical assessment suggested the 31-year-old would not be fit to take part in the entire tournament, New Zealand Cricket said.
New Zealand have decided to send him home and bring in Canterbury Kings fast bowler Kyle Jamieson, who will soon leave for Pakistan.
"We're really disappointed for Lockie," head coach Gary Stead said on Tuesday.
"Lockie is a key part of the bowling group and brings a lot of major tournament experience and we know how much he was looking forward to representing New Zealand at another major event."
Jamieson returned to domestic cricket in December after 10 months on the sidelines due to a stress fracture in his back.
"Kyle brings plenty of pace and extra bounce which will suit the conditions here in Pakistan," Stead said of Jamieson.
"He's shown since returning ... how effective he can be in the shorter forms of the game, and he's bowled with real pace and energy which is what you're looking for from a pace bowler, especially at a pinnacle event."
New Zealand are also without quick Ben Sears due to a hamstring injury.
Ferguson, who also plays for the Sydney Thunder in the BBL, is the latest fast bowler to miss out on the Champions Trophy, with injuries depriving the tournament of India's Jasprit Bumrah, Anrich Nortje of South Africa and Australian duo Pat Cummins and Josh Hazlewood.
Australia, who will be captained by Steve Smith, open their campaign against England on Saturday.Â
