The fast bowler was pencilled in to represent Yorkshire for a minimum of 12 matches during the competition, but Cricket Australia have now vetoed that decision.
It follows the arrival of Justin Langer as coach of Australia across all three international formats.
Langer is thought to want Stanlake to focus more on red-ball cricket and hence the decision to pull him out of the Vikings’ T20 campaign.
Martyn Moxon, Yorkshire’s director of cricket, says the withdrawal is “disappointing” for the club.
He said: “Cricket Australia got in touch with us on Friday and have decided on a different strategy for Billy.
“Now the new Australia coach (Langer) is in place, they want him to play some different cricket to T20 during the period he was due to be with us.
“Consequently, they’ve pulled him out of our deal, which is obviously very disappointing for us.
“We’re not the only county, it would appear, who have been affected by the appointment of Langer.”
Despite having played just two first-class matches due to his vulnerability to injury, the last of which came in November, 2015, Stanlake is thought to believe that red-ball cricket could prove to be his best format.
He is now likely to be put through a full pre-season with the Queensland Bulls ahead of any potential Sheffield Shield involvement later in the year.
The 23-year-old has suffered a series of injuries during his career.
A growth spurt at the age of 16 saw his body suffer from three separate stress fractures of the back, whilst other niggles in his pelvis and feet have also hampered his progress.
Indeed, Stanlake is currently continuing his recovery from a fractured finger that he sustained during an IPL stint.
Moxon added that Yorkshire are unsure of whether to look at alternative replacements from overseas or stick with their own players for the T20 campaign, which starts on July 5.
“We’ll assess the situation as to whether we go for a replacement or not,” added Moxon.
“We may choose to stick with our own players.”