All Blacks Head Coach Steve Hansen said the 22-year-old had not presented with any signs of concussion after the Test against Tonga last week but developed symptoms after the first training session this week.
"After discussing this latest episode with Luke, as well as our medical team, the decision has been made to, sadly, withdraw him from the Tournament.
"We all felt that the best thing for him to do is to take a break from rugby until he is symptom-free and ready to return to rugby.
"While it was a tough conversation to have, ultimately it was a very simple decision. We have a duty of care to look after our players and Luke's health is the most important thing above anything else."
Hansen added: "Luke's a young man with a hugely promising career ahead of him and I'm sure he'll get the chance to play at other Rugby World Cups in the future."
Luke Jacobson said: "I'm gutted to be missing the Rugby World Cup. However, I completely understand that this decision has been made with my health and best interests at heart. Whilst I'm feeling 98 percent okay, I know I'm still not quite right and by taking a break now, I'll give myself the opportunity to continue my career in the future. I wish the team all the very best and will be with them all the way."
Hansen said the team were all feeling for Luke and were supporting him. He will stay with the group until he is symptom-free and ready to fly home.
Tasman loose forward Shannon Frizell has been called in and will arrive in Japan on Saturday. Hansen said loose forwards Vaea Fifita and Dalton Papalii weren't considered for selection because they are currently injured.