"I am not in the peak of my form. Physically I am fine but mentally I am suffering. I want to have a holiday," Indurain added.
Indurain was bitterly disppointed when he failed to win a record sixth successive Tour de France in July -- finishing 11th overall over 14 minutes behind the winner Bjarne Riis of Denmark.
Indurain, who finished second on his last appearance in the Tour of Spain in 1991 behind Melchior Mauri, gained some compensation when he won the Olympic time-trial in Atlanta earlier this month.
Obree's health problems dashed any hopes he had of an Olympic medal at the Atlanta Games, where he was eliminated in the first round.
He had travelled stateside with high hopes after winning the world 4,000 metres pursuit title for the second time last year.
But a series of tests revealed he is not ready to return to the track.
Great Britain team trainer Doug Bailey said Obree still had the virus and specialists had advised him to rest.
Obree will now set his sights on competing in the world time trial championship in Lugano in October.