"Michael has not been selected for the tour of India because his place in the Test squad cannot be justified based on recent form," National selector Geoff Miller said in a statement.
"Our view is that it will be to England's benefit if he takes a break from international cricket in the period leading up to Christmas and spends time working on his game," he added.
Speculation had been rife on Vaughan's future ever since he stepped down as England skipper making way for Kevin Pietersen to take over.
He had been looking to regain his form playing for Yorkshire, but in four Championship innings he managed only 41 runs.
Miller said the selectors have had a word with Vaughan and the former skipper, who led England to the historic Ashes triumph against Australia in 2005, was supportive of the decision.
"We have discussed the situation with Michael. He fully understands the reasons for the selectors' decision and has made clear to us that he is fully committed to winning back his place in the England Test side.