Cahill suffered the injury when he was pushed into goalkeeper Joe Hart during the first half of Saturday's 1-0 win over Belgium at Wembley.
He was immediately sent for X-rays, although Hodgson feared the worst and that has now been realised, the Football Association have confirmed.
Liverpool's Martin Kelly has been called up as a replacement.
It completes a disastrous week for England, who have now lost three players after central midfield duo Gareth Barry and Frank Lampard had their hopes of taking part in the finals in Poland and Ukraine dashed by injury.
The one piece of good news for Roy Hodgson is that John Terry should be available after scans showed he had suffered no serious damage to his hamstring.
An FA statement released on Sunday afternoon read: "Gary Cahill has been withdrawn from England's Euro 2012 squad following the injury he suffered in the match against Belgium.
"The Chelsea defender has two fractures of his jaw, one either side. The England medical team have been in close contact overnight with Cahill's club doctors who will treat him moving forward.
"Liverpool defender Martin Kelly will be called into the squad - subject to agreement from UEFA's medical team. Kelly trained with the England players last week and was part of the group that travelled to Norway.
"John Terry has been scanned this morning and given the all-clear. He will be re-assessed on Tuesday when the team regroup."
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