Kiwi pop star Lorde last month announced she was also choosing to bypass the event when she received four Grammy nominations.
She's holding a make-up show two nights later at the same venue, with free tickets available to Laneway ticketholders until January 8.
In a statement, Laneway organisers said this wasn't possible with Blake, who performed a sold out and raved-about show at Auckland's Town Hall in August.
Co-promoter Mark Kneebone said festival bosses were "totally gutted" but understood and supported Blake's decision.
"We appreciate this is a huge achievement for James Blake and his career. Due to James Blake's tight tour schedule it is not possible for us to schedule replacement dates," Kneebone said.
Refunds are available until 5pm on January 16 to anyone wanting them.
It's not the only music festival to have problems with a headlining act after Britpop act Blur pulled out of next Friday's Big Day Out, citing problems with organisers. They were replaced by three bands: Deftones, Beady Eye and The Hives.
Artists confirmed for Laneway include Chvrches, Danny Brown, Frightened Rabbit, Earl Sweatshirt, Kurt Vile, Jamie xx, Run the Jewels, Savages, Unknown Mortal Orchestra and Haim.
Laneway
Where: Silo Park, Wynyard Quarter, Auckland
When: Monday, January 27 (Auckland Anniversary Day)
More information: Official website
- nzherald.co.nz