She is continuing to recover from a heavy cold
It is the first time since 1988 that she has missed the Christmas Day service.
"The Queen continues to recover from a heavy cold and will stay indoors to assist with her recovery," said a statement from the Palace.
"Her Majesty will participate in the Royal Family Christmas celebrations during the day."
The Queen, who turned 90 in April, traditionally spends Christmas at Sandringham with her family.
On Wednesday, the Queen and Prince Philip delayed their train journey there because they both had heavy colds, but on
Thursday the royal couple flew straight to Sandringham House by helicopter.
Hundreds of people have been gathering outside St Mary Magdalene Church at Sandringham on Christmas morning to watch the Royal Family arrive for the morning service.
Prince Philip, 95, walked with Prince Charles from Sandringham House to the church for a private mass at 9am - the first of the services the Royal Family attend.
Prince Harry was also at Sandringham, while the Duke and Duchess of Cambridge and their children are spending Christmas with the Middleton family at their estate near Bucklebury in Berkshire.
William and Kate attended church service at Englefield Church with Prince George and Princess Charlotte.
It is only the second time the couple have stayed away from the tradition royal gathering since they married in 2011.
The other time was in 2012, shortly after Kate, then pregnant with George, was discharged from hospital having been treated for severe morning sickness.
The Queen, who is the world's longest-reigning living monarch, said on Tuesday she would reduce the number of her patronages.