Priestland will be replaced by James Hook at Eden Park on Saturday after he failed to recover from the shoulder injury he suffered in the final minutes of the quarter-final victory over Ireland in Wellington.
Priestland was given as long as possible to recover but he is still needs to undergo rehabilitation over the next few days.
"Time was against Rhys," said Wales coach Warren Gatland, who has also named Stephen Jones on the bench.
"But we are happy that we have the talent and ability elsewhere in the squad to cover him.
"Rhys has done everything we have asked of him, and more, during this World Cup.
"But when we have players of the calibre and experience of James Hook and Stephen Jones coming into the squad and starting line-up, there is no sense that Rhys' absence leaves us any weaker."
Despite having reached their first semi-final since 1987 and being just 160 minutes away from possibly lifting the Webb Ellis trophy, Gatland insists his side are not getting carried away.
And although they have been the surprise package of the tournament, Gatland will be aware that Wales have lost nine of their last 11 games against France
Gatland added: "We know that the people in Wales and the fans that have travelled here are excited about reaching the semi-finals of the World Cup, and we are too, but beating France on Saturday must be, and will be, our sole focus.
"The time to reflect and to celebrate will come if we win our next two matches. Until that happens, our focus on the task ahead must be absolute."
Wales: 15 Leigh Halfpenny, 14 George North, 13 Jonathan Davies, 12 Jamie Roberts, 11 Shane Williams, 10 James Hook, 9 Mike Phillips, 8 Toby Faletau, 7 Sam Warburton (captain), 6 Danny Lydiate, 5 Alun Wyn Jones, 4 Luke Charteris, 3 Adam Jones, 2 Huw Bennett, 1 Gethin Jenkins. Replacements: 16 Lloyd Burns, 17 Paul James, 18 Bradley Davies, 19 Ryan Jones, 20 Lloyd Williams, 21 Stephen Jones, 22 Scott Williams.
Gilbert has released a new line of rugby cleats. The Gilbert Virtuo 8S is part of the exciting new product. Check it out.
The entire All Blacks apparel line has been updated for 2013/14. Check out the New Zealand All Blacks polo.
The Nike Tiempo is a solid rugby cleat and one of few styles still made from full-grain natural leather.
The Gilbert Blitz 8S rugby cleat is a great cleat at a great price of $69.99. Get a new pair of cleats today.
A cool looking all black rugby cleat with the high performance adidas is known for. Get in the Gear!
Wear the crest of the British and Irish Lions on your t-shirt. A great look for the summer.
$29.99
The All Blacks Performance t-shirt is black with hints of blue from the training jersey. Very Cool.
The New Zealand All Blacks training jersey for 2013/14. Get in the Gear!
The USA Rugby Pro Alternate rugby jersey is perfect for any fan of the Eagles. Get yours to wear during the summer Test matches.
The NEW All Blacks 2013/14 jersey has arrived at World Rugby Shop. Dare to wear the colors of the All Blacks.