A spokesman for Bute's promoter InterBox said Tuesday the southpaw will need surgery this week to remove bone fragments from his left hand. The injury, which occurred during training in Florida, is expected to take a few weeks to heal.
The bout scheduled for May 25 has been postponed to a date yet to be determined, he said.
The 33-year-old Bute was disappointed.
"I have never been in better shape," he said in a statement. "The fans that paid high prices to see me in action against Pascal deserve to see both boxers at their best.
"Unfortunately, I would be far from my best in my present state. For my own good, I have to take the advice of my doctor and undergo this operation."
A full house was expected at the 21,273-seat Bell Centre to see a showdown between Bute (31-1-0) and Pascal (27-2-1), two local fighters who are former world champions.
Bute held the IBF super-middleweight title until he was rocked in five rounds by Carl Froch in England a year ago. He followed that with a shaky win over Denis Grachev in November.
Pascal lost his WBC light heavyweight belt to veteran Bernard Hopkins in 2011. He returned from a 19-month absence to defeat unheralded Aleksy Kuziemski in December.
Rival promoter Yvon Michel is looking at finding another opponent for Pascal, who has fought only once in nearly two years.
"Now I have to start over, but I'm a professional and I know these things happen," said Pascal, who has been training in Las Vegas. "I'm telling myself that sooner or later, we will meet face to face in the ring and settle this."
Pascal also wrote on Twitter: "I still hope to fight on May 25. I'm ready to face anyone."