The decision comes just hours before the group was scheduled to fly to Australia for exhibition games leading up to the FIBA World Cup in China.
Fox played a team-low six minutes in Friday night's exhibition victory over Spain in Anaheim, California. He was a strong candidate to make the roster because he'd played so well over the past two weeks in practices and scrimmages.
"He makes fast people look not fast," Marcus Smart said of Fox's ability earlier this week.
Fox had been moved up from the Select Team during training camp and appeared to have solidified his role as a backup to starter Kemba Walker.
During USA Basketball's 97-78 exhibition win over the select team on Aug. 6, Fox scored 12 points and had three rebounds, three assists, three steals and two blocks in 15 minutes. He also made 6 of 9 shots, but Fox said Team USA head coach Gregg Popovich got on him for passing up shots.
Twelve will make the team.
"When you cut people from your regular NBA team, it's difficult,'' Popovich said earlier this week about making the final cut. "We're going to have to do that. And it's going to be even more so. I'm dreading having to do that. But it's got to get done.''
There have been more than 50 NBA players linked to this World Cup team at some point in the last year or so, most of them dropping out of consideration on their own, citing schedule demands. A few others left the team due to injuries or injury concerns.
"It just means that guys are doing their jobs,'' the Milwaukee Bucks' Khris Middleton said after Friday's game. "We're making it as tough as it can be on them. I think guys have been great all camp, just being positive, bringing energy and playing as hard as they can, giving their body up for everybody else. So that's a huge thing for everybody.
"From top to bottom, everybody is hungry and wants to prove something -- that we can get this job done."
ESPN's Ohm Youngmisuk and The Associated Press contributed to this report.