Both the media and the opposition called it a "diplomatic slap" for Croatia, which would become the bloc's 28th member state on Monday.
It also sparked speculation that the snub was linked to a new law adopted by Zagreb which would prevent the extradition of a former intelligence official to Germany, where he is wanted in connection with the murder of a political refugee.
But Merkel's spokesman said it was not the reason for Merkel's no-show."The Chancellor is unfortunately unable to go to Zagreb," said Steffen Seibert on Wednesday.
"The link that you have made with the ... law is wrong," he added. Merkel herself said she was unable to attend due to a busy schedule, according to Croatia's HINA agency.
Under the new law adopted by the Croatian parliament on Friday, the European arrest warrant can apply only for criminal acts committed after August 2002.
This meant that Zagreb would not respond to a German extradition request for Josip Perkovic, who is wanted by Berlin for alleged links to the killing of Croatian political refugee Stjepan Djurekovic in 1983.
Perkovic is a former official of the former Yugoslavia's secret services (UDBA). He also headed Croatia's military intelligence services after Zagreb proclaimed independence from the ex-Yugoslavia in 1991.
The ceremony in Zagreb celebrating Croatia's entry into the EU on July 1 will be attended by more than 100 European dignitaries, including European Council President Herman Van Rompuy.
However, many EU countries will not be represented by their leaders at the ceremony.