The series is tied at two games apiece with Game 5 set for Wednesday in Cleveland.
Hill was initially hurt in Game 1 of the first-round series when Pacers forward Trevor Booker set a back screen on him. He played in Games 2 and 3 before his back "locked up," according to Cavaliers coach Tyronn Lue.
"There's just not a lot of movement there,'' Lue said before the game.
Hill received four shots in between Games 3 and 4 to try to get ready to play.
"We tried to do everything possible, even after the game, getting treatment, trying to loosen it up, taking a shot and medicine in my butt," Hill said before Sunday's game. "Even today taking a shot earlier today in my back, another shot in the afternoon to try to loosen things up, but it's just not loosening up in a day or so.
"They think it's best to sit out [Game 4], to not prolong it, maybe give it these next couple days some rest and things like that to get back on Wednesday."
ESPN's Dave McMenamin and The Associated Press contributed to this report.