Woodley (19-4-1) was supposed to headline UFC Fight Night in Minneapolis opposite Lawler (28-13). UFC is seeking a replacement to keep Lawler on the card.
There is no immediate time frame for Woodley's return. The 37-year-old underwent surgery on his right hand last year, due to a dislocated thumb.
Sources said Woodley is scheduled to see a hand specialist next week.
Fighting out of St. Louis, Woodley surrendered his 170-pound championship to Kamaru Usman at UFC 235 in March. The June 29 bout against Lawler was supposed to be a rematch of a 2016 welterweight title fight, which Woodley won via first-round knockout.