Hargreaves, 30, joined City this week in the hope of reviving his career after being released by Manchester United.
But the former England international is still working his way back to fitness after a series of knee injuries and City have decided not to include him among the 17 unrestricted places they had available in their Champions League squad.
The other eight places in a group of up to 25 must be reserved for homegrown or locally-trained players.
Hargreaves' absence means he will miss two Group A games against another of his former clubs, Bayern Munich, as City enter the competition for the first time.
However, City manager Roberto Mancini will have the chance to review his squad in January should his side progress to the knockout stages.
Meanwhile, Belgian international Lukaku has surprisingly been omitted from Chelsea's squad for the group stages of Europe's elite club competition.
The 18-year-old, who signed for a reported ?£18 million from Anderlecht last month, will not be able to feature until the last 16, while Chelsea's other close-season signings Oriol Romeu, Juan Mata and Raul Meireles are all in the 22-man squad.
Source: AFP
Source: AFP