The Cardiff Blues back row had also been named among the replacements for Saturday's Millennium Stadium encounter with South Africa but has now been forced to withdraw through injury.
Powell pulled up in training on Tuesday and a scan later revealed a tear to his left thigh muscle.
The 28-year-old faces at least four weeks on the sidelines and therefore won't travel to New Zealand for the two-Test series with the All Blacks next week.
Powell has been replaced in the Wales tour party by Dragons openside Gavin Thomas, while uncapped Scarlets youngster Rob McCusker takes his place on the bench against the Lions' conquerors this weekend.
"It's obviously disappointing to lose someone of Andy Powell's quality, but Gavin now has a chance to make and impact and he, like Rob, won't be taking that chance lightly," said Wales assistant coach Robin McBryde.
McCusker played in just over half the Scarlets' Magners League fixtures and is in line to make his senior international debut 12 months after missing out on a place in the squad to tour North America.
"Rob has been around the squad for some time and was unlucky to miss out on the tour to America and Canada with us last summer after being named in the larger initial squad," added 2001 Lions hooker McBryde.
"He is a tough young prospect and it is only a matter of time before he gets his chance and wins that first cap, and if we need him on Saturday he won't let us down."
Last capped by Wales on the summer tour of Australia in 2007, Thomas has represented three of the four Welsh regions and was in impressive form for the Dragons as they came close to a shock Magners League Play-Off spot this season.
"Gavin is an experienced player with over 20 caps who has had some injury problems over the last few years, but he is fighting fit now and has impressed everyone in training."
Revised Wales squad vs South Africa, Millennium Stadium, Saturday, 2.30pm
Lee Byrne; Leigh Halfpenny, James Hook, Jamie Roberts, Tom Prydie, Stephen Jones, Mike Phillips; Paul James, Matthew Rees, Adam Jones, Bradley Davies, Deiniol Jones, Jonathan Thomas, Sam Warburton, Ryan Jones (captain)
Replacements: Huw Bennett, John Yapp, Alun Wyn Jones, Rob McCusker, Richie Rees, Dan Biggar, Andrew Bishop
Bold denotes Lion