And the two-times Lions tourist also accused Gatland of failing to respect the tradition of the combined home nations representative side.
"I've been uncomfortable throughout this tour whenever Warren Gatland has spoken about the captaincy," he told BBC Radio 5 Live.
"He tries to depower it, he consistently says it isn't about leadership and that isn't the most important thing. Having been on two Lions tours myself under (former England skipper) Martin Johnson, I would have said the leadership of the captain was the most important thing.
"Brian O'Driscoll has been quiet in the two Tests but at every stage, he has been the clarion call once Paul O'Connell got injured. I just think Gatland has made a terrible mistake."
O'Driscoll was widely seen as the favourite to captain the side in Saturday's third Test in Sydney, with Paul O'Connell and Sam Warburton both injured.
But the 125-cap Ireland international was not even included in the 23-man matchday squad as Jamie Roberts and Jonathan Davies were paired at centre as two of the 10 Wales players in the starting line-up, with England's Manu Tuilagi on the bench.
Wales lock Alun-Wyn Jones will instead lead the side and Wood feels his former international colleague's leadership will be missed.
The fit-again Roberts will be central to a physical approach at ANZ Stadium and Wood, who won 58 Ireland caps at hooker, is upset at the lack of a "spark" in the tourists' game.
"It's entirely built around power," he said. "A huge amount rests on Jamie Roberts' shoulders and they were crying out for him in the last two weeks. I just think Brian's subtlety off him would have worked. You can say (Gatland is) picking on form but he's picked an unbelievably direct team with very little guile in it, specifically to play this game plan."
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