The Colombia international, who has not played since October following a thigh injury, has been replaced in the squad by new loan signing Alexandre Pato.
The 29-year old has made just one Premier League start since signing on a season-long from Monaco last July.
Former AC Milan forward Pato, 26, signed for Chelsea last week on a six-month loan from Corinthians.
However, the Brazil international has not featured since November as he looks to regain full fitness following a series of injuries.
Chelsea interim boss Guus Hiddink has also included new signing Matt Miazga in both his Champions League and Premier League squad lists for the second half of the season.
The United States defender, 20, joined Chelsea on a four-and-a-half-year contract from New York Red Bulls last week.
Falcao, who was linked with a deadline day move to former club Atletico Madrid, has been named in Chelsea's 25-man Premier League squad.
Manchester City manager Manuel Pellegrini revealed on Monday that Nigerian forward Kelechi Iheanacho, 19, will replace Samir Nasri in City's 25-man Champions League squad.
France international midfielder Nasri, 28, is set for at least another two months on the sidelines following a hamstring injury and tendon surgery in November.
Clubs featuring in the knock-out stages of the Champions League were required to supply European football's governing body Uefa with their updated squad lists by Tuesday night, but Arsenal have yet to publicly announce any changes to their 25-man squad.
The Gunners are expected to make one change, with new midfield signing Mohamed Elneny, 23, replacing defender Mathieu Debuchy, 30, who has joined Ligue 1 side Bordeaux on loan until the end of the season.
Radamel Falcao has been omitted from Chelsea's 25-man squad for the Champions League knock-out stages.