"With that in mind, it's better for him to continue his rehabilitation at Lincoln."
Santner (23) was first selected by the Black Caps on this year's tour of England and played in the five One-Day Internationals, before missing the tour of Zimbabwe and South Africa after breaking his thumb in a training accident.
Larsen said Santner's strong recent form for NZA in their warmup fixture (in which he scored a century) and series against Sri Lanka A sealed his selection.
"Mitch clearly isn't a direct, like-for-like replacement for Corey - but in terms of the bigger picture, he's an allrounder who can bat at No. 6 or 7 and he's also a front-line bowler," said Larsen.
"It's a good opportunity for him. We believe his left-arm spin will add some variety to our options and his batting is well-suited to the conditions expected across the Tasman."
The Black Caps depart for Australia on October 20.