Media reports said South Africa's record goal scorer, now 35, had withdrawn from the host nation's preparations with a hamstring injury that will not recover in time for the tournament, which starts on Jan. 19.
McCarthy has been beset by weight problems at times in his career but had a revival in the autumn of his playing days after returning home to join Orlando Pirates. He scored vital goals last season as the club won the championship on the last day in May.
He had returned to South Africa in mid-2011 after flopping at West Ham United, whose vice chairman Karren Brady described his signing as a "big fat mistake".
South Africa also dropped him before hosting the 2010 World Cup finals.
However, his form over the last 12 months earned him a recall to the South Africa side in September. They have been desperate for a reliable goal scorer after a run of mediocre performances.
McCarthy, with 31 goals in 80 caps, played his first international in more than two years in a September friendly against Brazil but tore his hamstring within minutes of coming onto the pitch in Sao Paulo.
The injury has since been aggravated and on Thursday he was forced to withdraw as South Africa started a three-day training camp in Johannesburg.
It was at the Nations Cup finals in Burkina Faso in 1998 that a slim, fresh-faced and 20-year-old McCarthy rose to prominence, finishing joint top scorer and confirming the potential that Ajax Amsterdam had seen the previous year when signing him.
He went on to play in Spain and England and won the Champions League with FC Porto in 2004.
South Africa are due to name their 23-man squad for the three-week tournament on Sunday. They open the Nations Cup with a Group A match against the Cape Verde Islands at Soccer City in Johannesburg.