The club placed the 32-year-old Malhotra on injured reserve Thursday for the rest of the season. General manager Mike Gillis said he made the move to preserve Malhotra's long-term health because he remains vulnerable to serious injury.
Malhotra is in the final season of a three-year contract he signed after joining the Canucks as a free agent from the San Jose Sharks. Pending a new deal with another club, his career could be finished.
Gillis added the door is closed to a possible return in the playoffs.
"For me, it's the hardest thing I've had to do in this job," Gillis said. "It's, basically, a situation that changed Manny's life in a half-a-second play and watching what he did to try and recover ... it was a very difficult decision for me to make and one I've thought about for some time. It wasn't done on the spur of the moment at all."
In March 2011, Malhotra sustained a serious eye injury when struck by a puck during a game against Colorado. The full extent of the injury wasn't disclosed, but he underwent a series of operations in the summer of 2011.
Malhotra had no points in nine games this season after managing just seven goals and 11 assists in 78 games in 2011-12.
Gillis said he expressed his concerns to Malhotra at the end of last season and wanted to give him 10 games to prove he was at less risk. The GM said there was no "discernible change" in Malhotra's risk level and there were times when the player was "extremely vulnerable."
"In my opinion, it didn't get worse," Gillis said. "But there wasn't the type of change necessary for him to not be at a much higher risk than everybody else out on the ice."
Malhotra has not practiced or played this week. Coach Alain Vigneault said Malhotra missed practice Monday because he was taking a "personal day," and he didn't play in Vancouver's 2-1 win over Minnesota on Tuesday night for what the team said was "a personal matter."
Malhotra was chosen seventh overall by the New York Rangers in the 1998 draft, and has 108 goals and 170 assists in 864 career games in 14 seasons with the Rangers, Dallas, Columbus, San Jose and Vancouver.
Gillis praised Malhotra for his leadership and strong character and said he will remain with the club in a yet undetermined role.
"There are times when hockey is a secondary idea behind long-term health," Gillis said. "These are really difficult decisions for all of us.
"It's going to be difficult for Manny ... but I took (the decision to stop playing) out of his hands -- and I wasn't going to move forward the way it was going."