Wood was hurt on the fourth day of the second Test between the teams when diving to make a stop near the boundary, though he was still able to bowl in the remainder of the match.
After India secured a dramatic final-day victory to go 1-0 up in the five-match series, the 31-year-old was included in England's squad for the next contest, with the expectation at the time being he would be fit to feature at Headingley.
However, ahead of the game starting on Wednesday, the England and Wales Cricket Board (ECB) have confirmed he has now been ruled out of contention.
While unavailable for selection, Wood will remain with the squad in Leeds to continue undergoing treatment and will be assessed at the end of the match.
England were already certain to make at least one change to the XI that went down by 151 runs last time out.
Dom Sibley failed twice in the game and was subsequently dropped from the squad. The opener averaged just 14.25 in the series, while he has managed two centuries in 22 appearances overall in his Test career.
Dawid Malan earned a recall and could well slot into a position in the top order.
Lancashire pace bowler Saqib Mahmood, called up as cover for the second Test but yet to make his debut in the longest format, was also named in a 15-man squad, and could be the natural replacement for Wood.
England are without Jofra Archer, Stuart Broad, Olly Stone and Chris Woakes due to injuries, while all-rounder Ben Stokes is taking an indefinite break from the game to prioritise his mental health.
The seamer limped off late on day three, with scan results ruling him out of the last two Tests, with Josh Hull receiving his first senior call-up as his replacement.
Hull, who stands at 6ft 7ins, has played 10 first-class matches and took five wickets for the England Lions in their tour game against Sri Lanka earlier this month.
Olly Stone, who was in the squad for the first Test at Old Trafford, is likely to take Wood's place in the XI at Lord's, with the Test starting on Thursday.
Wood has shone on the international stage so far this summer, taking 11 wickets in three Tests, while also providing some exciting performances with the bat.
It is thought the 34-year-old will be back in time for their Test tour of Pakistan in October, when England will also hope to have captain Ben Stokes and Zak Crawley back after their own respective injuries.
Wood steamed in to take 4-65 as the tourists took an unassailable 2-0 lead with one match to play.
England had only won two Tests in Pakistan before a dramatic triumph in Rawalpindi last week and have now doubled their tally.
Ben Stokes' in-form side have made history, becoming the first England team to win two Tests in a series in Pakistan as they continue to ride on the crest of a wave under the inspiration captain and head coach Brendon McCullum.
Fast bowler Wood swung the game back in England's favour by getting Mohammad Nawaz (45) caught behind to end a sixth-wicket stand of 80 before seeing the back of Saud Shakeel (94) in his next over.
The excellent (2-23) Ollie Robinson finished off the job, while James Anderson (2-44) also bowled brilliantly in win that will live long in the memory for Wood.
He told Test Match Special: "It's a monumental day. Amazing feeling. The effort that everyone's put stands out for me. It's not just one game, it's two games.
Wood added: "I managed to get two wickets when Stokesy asked me to change the game. All game I got my bouncer a bit too off side but in that spell, I got it right.
"I feel knackered. It was a big effort and I'm proud of myself for it. Everyone feels great."
Wood continued: "It's something we'll look back at proudly at the end of our career. It hasn't sunk in completely yet but I think we'll be very proud."
England have won eight of their nine Tests with Stokes as skipper and McCullum at the helm.
The fast bowler sustained another injury setback during England's successful T20 World Cup campaign, missing the semi-final and final in Australia.
Wood sat out a training camp in Abu Dhabi last week in the hope of making the first contest of a three-match series against Babar Azam's side, which begins in Rawalpindi on Thursday.
Head coach Brendon McCullum said: "Mark's not going to make the first Test squad unfortunately because of his injury.
"We expect him to be ready for the second Test and otherwise we've got a full squad to pick from."
The 32-year-old quick has played 26 Tests for England, taking 82 wickets at an average of 31.91.
England also have James Anderson, Ollie Robinson, Jamie Overton in their squad, while captain Ben Stokes is another seam option.
England's other pace options for the first Test include James Anderson, Ollie Robinson, Jamie Overton and captain Ben Stokes, while Jack Leach is the main spin option.
Leg-spinning all-rounder Renan Ahmed could become the youngest man to play a Test for England at the age of 18 if he is given the nod.
Wood had put himself forward for an IPL stint at the highest base price (2 crore/£200,000), but opted out on the eve of the auction this week.
The paceman's decision came after he flew to India for the remainder of the Test series, five Twenty20 Internationals and three ODIs.
Wood, who was given time off after the Sri Lanka tour last month, says playing for England in his priority, with the T20 World Cup and an Ashes series in Australia to come after a busy summer on home soil - including facing India again.
The quick said: "I'm going to spend six weeks here in India and then it would be another eight weeks on top of that, so that's 14 weeks.
"We're in a strange situation with COVID and unfortunately you can't see your families during that winter period coming out with India, like we usually do.
"I just wanted to be able to switch off, recharge and go back home for the second reason, which is being ready for England.
"I've tried to prioritise that and think later on in the year we've got loads of cricket going on and I don't want my body to fail me or be a bit goosed mentally or physically going into the back of the year, with a World Cup, Ashes and big series against India at home.
"I wanted to make sure I was ready from that point of view and have some family time because this block is a long time away from home."
England all-rounder Moeen Ali was snapped up by Chennai Super Kings for £700,000 on Thursday and although Wood knows he may have missed out on a lucrative deal, the 31-year-old hopes to get another chance to play in the IPL.
"Obviously there's been some big names gone for some big money and never begrudge them that, I think it's life-changing money, so it was a difficult decision for me," he said on Friday.
"The plus side is you're not just going for money reasons, you want to prove [yourself] hopefully going into the World T20 and learn some skills. Plus I feel like I've got a little bit of unfinished business with the IPL, I feel like I didn't do very well well in one game for Chennai last time [in 2018].
"I'd like another crack at some point, I just didn't feel like the time was right. Every player has their own decision, but for me it was to prioritise my family and England."
