Nair, who played two ODIs for India, got his chance to be a part of the Test squad after Dhawan was ruled out of the third Test following a minor fracture on his left thumb.
"The All-India Senior Selection Committee has named batsman Karun Nair as the replacement for injured opener Shikhar Dhawan in the Indian team," BCCI secretary Ajay Shirke said in a statement.
The left-handed Dhawan sustained the fracture after he was hit twice by New Zealand pace spearhead Trent Boult during the second Test.
India won the second Test by 178 runs at Eden Gardens to take an unassailable 2-0 lead in the ongoing three-Test series.
Dhawan was hit on his left thumb twice on the third day of the second Test. The medical team then took him to a city hospital for scans. He was recommended 15 days rest.
"A minor fracture has occurred, and he has been recommended 15 days rest, which effectively rules him out of the next Test," said India's media manager after the match.
On Sunday, the left-handed opener took blows on his bottom hand thumb twice with the ball rising awkwardly. He survived some anxious moments, managing to open his account after 14 balls, and the swollen thumb had to be taped. He was soon rushed to a city hospital for an x-ray.
He did not take the field today when New Zealand were batting in their second innings.
Earlier, the other Indian opening batsman, KL Rahul, was ruled out of the remainder of the series after he suffered a right hamstring during India's second innings in the opening Test at Kanpur. His injury made way for Gautam Gambhir into the Indian Test squad after a gap of two years. It will be either Nair or Gambhir who will get a place in the playing XI.
Last Updated 31, Mar 2018, 6:47 PM IST