Peaty claimed gold medals in the men's 50 and 100 metres breaststroke, as well as the 4x100 medley relay, during the 2019 edition of the world championships.
However, the 27-year-old will not defend his titles after sustaining a foot injury earlier in the week while training in the gym.
In a post on Twitter, Peaty said: "I have been advised to rest for 6 weeks which unfortunately takes me out of contention for the FINA World Championships in Budapest next month."
The three-time Olympic gold medallist was the overwhelming favourite to defend his 50 and 100 metre titles in Budapest. Instead, the Uttoxeter-born swimmer will now set his sights on the upcoming Commonwealth Games.
He added: "I've fortunately never had to deal with an injury in my swimming career so this is a real blow and a new challenge for me.
"I'm already in great hands and starting to recover but, honestly, I'm devastated. I was on track for a huge summer so, like when anything doesn't go according to plan, it's a really challenging time.
"I won't compromise my recovery and I will use this time to reflect on what the sport means to me and what it feels like to watch someone else win a race I should be in. It's not going to be easy!
"I'll never shy away from a challenge but on this one I've got to use my head more than my heart. I will be back in the pool as soon as I can be, with my focus on recovering and building up my strength ahead of the Commonwealth Games this summer."
The 2022 World Aquatics Championships will get underway on Friday, June 17. The event, which is being held in the Hungarian capital, will run until Sunday, July 3.