The 28-year-old made the announcement on his social media account stating he would not put his wife and his family at risk, Xinhua news agency reported.
"It is with deep regret I announce that I will not be competing in the 2016 Summer Olympic Games this coming August in Rio de Janeiro," Day said in the statement.
"The reason for my decision is my concerns about the possible transmission of the Zika virus and the potential risks that it may present to my wife's future pregnancies and to future members of our family."
The Zika virus is a mosquito-borne disease which has been linked to severe birth defects for women who are infected with Zika during their pregnancy. The Zika virus began spreading in Brazil during 2015.
As golf returns to the Games slated to begin on August 5, for the first time since 1904, the sport will now be without two of its biggest drawcards, after world No. 4, Rory McIlroy, withdrew earlier this week from Rio -- also due to Zika virus concerns.
McIlroy and Day join Australian golfer Marc Leishman, South Africa's Branden Grace, Charl Schwartzel, Louis Oosthuizen and Fiji's Vijay Singh as the other golfers choosing not to attend Rio due to Zika. Australia's Adam Scott and Northern Ireland's Graeme McDowell have withdrawn for undisclosed reasons.
In May, 150 health experts sent a letter to the World Health Organisation to postpone the Olympic Games in Rio over the Zika virus concerns. The letter was rejected.
Day said he has informed Australia's coach, Ian Baker Finch, and the CEO of Golf Australia of his decision.
But he has confirmed he will represent Australia at the World Cup in Melbourne in November.