The newly crowned world number one claimed the Porsche Tennis Grand Prix in Stuttgart last week - her fourth consecutive tournament win this season.
Swiatek is in the midst of a 23-match winning run, with her last defeat coming against Jelena Ostapenko in February at a WTA event in Dubai.
The 20-year-old was expected to be the top seed in Madrid - the first WTA Tour 1000 event on clay this season - and was set to face a qualifier on Friday.
However, with the French Open less than a month away, the 2021 Roland Garros champion has decided to take a break in order to fully recover ahead of her visit to Paris.
"Unfortunately my team and I decided that I need to withdraw from Madrid. I hope to see you next year," Swiatek revealed on Twitter.
"After intense last weeks and winning four titles in a row, it's time to take care of my arm that has been fatigued since the Miami Open and I haven't had a chance to handle it properly.
"I need a break from playing so intensively in order to treat my arm well and that's why, unfortunately, I have to withdraw from the Mutua Madrid Open.
"My body needs rest. I'm going to take some time to prepare for Rome and Paris. See you soon there.
"Hopefully, I will play in Madrid many times in the future - looking forward to it."
Swiatek has won 30 of her last 31 sets and in that time she has enjoyed victories over the likes of Emma Raducanu, Naomi Osaka, Petra Kvitova and most recently Aryna Sabalenka.
The Pole is in the midst of her best winning run since joining the WTA Tour, but has some way to go before emulating Martina Navratilova's Open Era record of 74 straight victories - a record she set back in 1984.