The pair clashed at Les Combes on lap two of the 2014 Formula 1 Shell Belgian Grand Prix. Rosberg had moved alongside Hamilton down the Kemmel straight, but as the Briton held his line through Les Combes, Rosberg's front wing hit the left rear of Hamilton's car, with the subsequent puncture and damage effectively ending the Briton's race hopes.
Wolff said the accident was a clear transgression of the fundamental rules Mercedes have laid down in an effort to allow the pair to race together without compromising the team's overall objectives.
"Today we saw our worst case scenario when the drivers made contact on lap two - and that ultimately cost us a one-two finish today, because we saw that our car had that kind of performance in it," Wolff said.
"It has been our clear policy to let the drivers race this year but rule number one is: don't hit each other. To see that kind of contact, so early in the race, is an unacceptable level of risk to be taking out on track.
"It cannot - and will not - happen again."
Wolff added it was absolutely imperative for the team to convert their performance advantage into silverware - an objective threatened by the lap-two clash.
"Overall, not a good day for the team - and it is clear that we need to strengthen our focus on securing the constructors' championship by delivering the potential of both cars in the next races," he said.
"Now we need to regroup and come back stronger in Monza."
After having a chance to review the incident on TV, Rosberg said: “It was a racing incident, that’s the best way to describe it, and that’s how the stewards saw it."
Asked whether he thought it might have been a better idea to have waited for another opportunity to overtake Hamilton later in the race, the German added: “I didn’t see any risk in trying to overtake, so why should I not try? The opportunity was there [to overtake], even without DRS because I was so much quicker, so I gave it a go.
“[Going] inside was not possible so I tried around the outside. To ask ‘should I have waited?’ is very hypothetical because who knows what happens afterwards. The opportunity was there and for me it was not a risky situation.”
Hamilton, meanwhile, said he was devastated to retire, insisting he had given Rosberg enough room.
"I'm gutted with the result - not just for my own championship hopes but for the team, as we really should have had a one-two today," he said.
"I didn't fully understand what had happened until I saw the replay just now, but I gave him plenty of space, took the corner like I usually do and suddenly felt a big hit from behind. There was nothing I could do about it and that was effectively my race over.
"What happens next is not my call - that's one for the bosses to make. But I'm now almost 30 points behind in the championship so that's the main thing on my mind. It's a big gap and it will be hard to recover from here."