Reports emerged on Wednesday that Thiago had suffered another knee problem and Bayern have now confirmed the 23-year-old will miss the upcoming tournament in Brazil.
A Bayern statement revealed Thiago – training ahead of Saturday's DFB-Pokal final against Borussia Dortmund – tore inner ligaments in his right knee on Monday.
The former Barcelona man sustained a knee injury against Hoffenheim at the end of March and had not played since, but was an unused substitute in Bayern's 1-0 win against Stuttgart last weekend.
Thiago had been selected in Spain's provisional World Cup squad earlier this week and having missed out on the 2012 European Championship due to injury, his dreams of playing on the biggest stage of all two years later are now over.
Bayern chief executive Karl-Heinz Rummenigge telling the club's official website: "This is a bitter pill for Thiago.
"A young lad who has been working on his comeback and the World Cup in his father's homeland…and suddenly both dreams have burst.
"We will take great care in the coming weeks about him and do everything to ensure that he is fit again to start the season 2014-15."
Spain, attempting to defend their World Cup crown, begin the tournament in a difficult Group B that also contains 2010 finalists the Netherlands, Chile and Australia.
