Wallaby flyhalf Stephen Larkham is out of the Wallabies' upcoming tour of Europe due to his troublesome knees.

Medical staff has told Larkham he requires an extensive rehabilitation program. His withdrawal means the Wallabies go into the short tour without their world-class halves combination after halfback George Gregan withdrew with a neck injury.

Also in doubt is Wallaby reserve and Brumbies pivot Rod Kafer with his fiancée expecting a child.

Waratahs and former Wallaby centre Nathan Grey has been brought into the squad as a replacement player. His Waratahs team-mate Chris Whitaker earlier replaced Gregan.

"Towards the end of the Tri Nations series my knees were getting more and more painful," Larkham said. "The ARU doctors are of the opinion that if I don't take the time to rest my knees and strengthen my legs then the problem will continue to get worse.

"It will be frustrating not to be part of the team but I am confident that this is the right time to fix what had become a long standing problem."

Wallaby coach Rod Macqueen said the loss of both Larkham and Gregan was a major blow, but it also presented an opportunity for another player.

"Missing out on the tour is obviously disappointing for Stephen, however, we have a duty of care to his long term future," Macqueen said. "The loss of Stephen on top of George Gregan is far from ideal but it has created an exciting opportunity for the other leading Australian players who I am sure will be up to the challenge."

The short tour starts on October 28 against a French Barbarians side at Bayonne, followed by a World Cup final rematch against France at Stade de France on November 4; Scotland at Murrayfield on November 11 and finally England at Twickenham on November 18.