Sagan, who will ride this year's Tour de France for his Tinkoff-Saxo team, has been handed Slovakia's only spot for the mountain bike race which will take place on August 21.
He will not ride the road race in Rio.
"Everyone thought that Peter Sagan, as world champion will start the road race. However, Peter offered his place in the road event in exchange for place in the cross country mountain bike race," Peter Privara, president of the Slovak Cycling Association was quoted as saying in a statement from the Slovakia Olympic Committee.
"After finishing the Tour de France, Peter will do some a special training for four weeks. He will not go to Rio just to take part but to aim for a good position."
Sagan, 26, is one of the biggest names in road cycling but began in cross-country where he became a junior world champion.
This year, he claimed his first Monument with victory in the Tour of Flanders, after which he competed in several mountain bike races in Austria and the Czech Republic in order to secure the qualification points required for Rio.
After competing in the recent Tour of California, winning the sprinters' category, Sagan stayed in the U.S. and trained on mountain bikes in Park City, Utah.
He will target stage victories and aim to win the points classification green jersey for a fifth year in succession at the Tour de France.
The Slovakian Olympic Committee said Martin Haring (his was the MTB place) and Patrik Tybor would ride the Rio road race, which will take place on a hilly course not suited to Sagan.
"The aim is to give Slovakia the best possible result. Peter Sagan in the past managed to win the world title in mountain biking, so his chances of a good outcome are realistic," head of Slovakia's mountain bike commission John Žilova was quoted as saying in a statement from the Slovakia Olympic Committee.
