The big decision was made on Friday afternoon, despite Holmes moving well during a fitness test on his injured hamstring that morning.
The 20-year-old, who suffered the injury during the preliminary final against Brisbane, did not take part in the Cats' light training run at the MCG on Friday afternoon.
He spoke to club staff on the boundary line as Cats teammates completed light work ahead of Saturday's decider against the Sydney Swans at the MCG.
Irishman Mark O'Connor has been the medi-sub in the Cats' two previous finals and will replace Holmes for the decider.
Brandan Parfitt and Sam Menegola were also in the mix after being named with O'Connor as emergencies alongside back-up ruckman Jon Ceglar.
"It's desperately unlucky for Max because he was so close," Geelong coach Chris Scott told Channel 7.
"This was one of those calls where, in my mind, he is probably 98 per cent there, but we just needed certainty for the team it's really hard on him.
"He probably could have done it but this was the right decision under the circumstances and Brandon and Mark have been good for us this year.
"We are just going to go with the fit guys."
AFL fans and commentators were left gutted for Holmes.
"I just don't think you can take that chance, it's absolutely gut-wrenching for him," Former Melbourne captain Nathan Jones said on Channel 7.
Former Geelong player Cameron Mooney described is as "horrible" for the young Cats star.
Absolutely gutted for Max Holmes 😭
— Ryan Reynolds (@Reynolds_R) September 23, 2022
— Rohan Connolly (@rohan_connolly) September 23, 2022
Shattered for Max Holmes, but it’s the correct call #GeelongStrong
— Luke (@Marruso89) September 23, 2022
Max holmes out, that’s such a shame he couldn’t get fully fit for the granny. That would be heartbreaking for him and changes the dynamic of the team game structure #AFL
— Alex Trovato (@alexdimov8) September 24, 2022
Absolutely devastating for Max Holmes. Deserves a medal if they get up today
— Jasper Chellappah (@Jasperc53) September 23, 2022
Sydney Swans insist Sam Reid will play
Sydney have also had injury concerns during the week, but coach John Longmire insisted before the game that Sam Reid (adductor) and Justin McInerney (ankle) will play.
Reid was substituted out of the preliminary final win over Collingwood, but McInerney managed to finish the game.
"(Reid) got some scans on Monday and that was really encouraging, so we were confident from that point," Longmire said.
"He did some training on Thursday and did exactly what he needed to do.
"Our medical staff have been terrific, we were always confident that (McInerney) would be right.
"He finished off the game strongly last week so he's right to go."
Sydney have also backed unlucky forward Logan McDonald to bounce back from his axing for the decider.
McDonald, who has played 17 games this season (including two finals), was brutally dropped for Saturday's clash against Geelong at the MCG.
The former No.4 draft pick has made way for fellow tall Hayden McLean, who played the first eight games of the season but has been in the VFL since.
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