"I was very much looking forward to the opportunity," said Pace, her nation's top-ranked woman golfer at 38th in the world.
"However, over recent months my team has been monitoring the situation regarding the Zika Virus and finding out as much information as possible.
"After weighing up all the options and discussing it with my family and team, I have decided that due to the health concerns surrounding the Zika virus, I will not be participating."
"I hope that everyone can understand that this was a very difficult decision to come to, however my health and my future family's health must come first," Pace said. "I'm a very proud South African and I love representing my country whilst I play on the LPGA Tour around the world."
The LPGA also released a statement regarding players competing in Rio, stating it will support and respect whatever choice any of its players make regarding Zika and the Olympics.
Many of the world's top-ranked men's players have said no to Rio, including top-ranked Jason Day of Australia, his countrymen Adam Scott and Marc Leishman, Fiji's Vijay Singh, South Africans Louis Oosthuizen, Charl Schwartzel and Brendan Grace and potential Irish team members Rory McIlroy, Shane Lowry and Graeme McDowell.
"It's not every week, not every year you get to do this, to represent your country amongst the world best athletes in other sports, so I'm super excited about it and there are just so many positives from Rio that golf can take."
World number three Park In-Bee of South Korea has a left thumb injury that might keep her out of Rio but otherwise top LPGA players have not pulled out.
The two US players set to compete, Lexi Thompson and Stacy Lewis, have indicated they plan to participate.
