Collison, who is averaging 4.9 assists per game, took part in Wednesday morning's shootaround. Coach Frank Vogel was encouraged and thought Collison might be able to play against the Cavaliers. But Collison was still tender and Vogel ruled him out, not wanting take any chances and risk making the injury worse.
Vogel expects Collison to return Friday night when the Pacers host Cleveland.
George Hill will start his second straight game in place of Collison. On Monday, Hill scored 18 points with four assists and didn't have a turnover in a win over Toronto.
The Pacers have the third-best record in the Eastern Conference.