Shaw, 19, injured his left ankle while attempting a catch in a practice game against Cricket Australia XI. The Mumbaikar had scored 66 in that game in Sydney.
"The All-India Senior Selection Committee has named Mayank Agarwal as his replacement," said a BCCI release. With KL Rahul failing terribly in two Tests, the team management may hand Test debut to 27-year-old Agrawal, who plays for Karnataka.
Rahul scored 2 and 44 in Adelaide but managed 2 and 0 in Perth, where India are staring at a defeat. Agarwal who has played 46 first class games, scored 25 and 53 for his Ranji side against Gujarat in his last match.
The selectors have also added all-rounder Hardik Pandya to India's squad for the third and fourth Test to be played in Melbourne and Sydney respectively. The third Test is scheduled to begin in Melbourne from December 26.
India's squad for the third and fourth Test against Australia: Virat Kohli (captain), M Vijay, KL Rahul, Cheteshwar Pujara, Ajinkya Rahane (vice-captain), Hanuma Vihari, Rohit Sharma, Rishabh Pant (wicket-keeper), Parthiv Patel (wicket-keeper), R Ashwin, Ravindra Jadeja, Kuldeep Yadav, Mohammed Shami, Ishant Sharma, Umesh Yadav, Jasprit Bumrah, Bhuvneshwar Kumar, Hardik Pandya, and Mayank Agarwal.