The Barcelona man missed much of the last two months of the domestic season with a torn meniscus, but was expected to be fit for the hosts' tournament opener against Romania at Stade de France on June 10.
However, following further tests to a muscle injury sustained in the past week, head coach Didier Deschamps has opted to remove him from the squad, with Lyon defender Umtiti summoned as his replacement.
"Jeremy Mathieu appeared at the assembly of the France team at Clairefontaine on Tuesday, May 24, suffering from a muscle injury in his right calf," a statement from the French Football Federation (FFF) confirmed.
"The development of his injury and the results of the latest tests have led Didier Deschamps not to keep him on the list of 23 for Euro 2016. He is replaced by Samuel Umtiti."
The news comes as a major blow to the host nation's hopes of a first title since Euro 2000, with Real Madrid defender Raphael Varane having also been ruled out of the finals due to a thigh injury.
Sevilla centre-back Adil Rami was called up as his replacement.
France face Cameroon and Scotland in friendly matches next week before the tournament gets underway.