"I am sorry it will have to end this way but these things happen," he said.
"I hope you will still be able to see an England team in a final of a major tournament soon."
Hodgson, who won 33 of his 56 games in charge, would have been out of contract at the end of the tournament and was set to have talks over having it renewed.
FA chairman Greg Dyke had stated he would only stay on if England "do well" in France, indicating that meant at least reaching the quarter-finals.
England qualified for Euro 2016 with a 100% record in their group. They started the finals with a 1-1 draw against Russia before beating Wales 2-1 and drawing 0-0 with Slovakia in their final Group B game - results that left them in second place and in a tougher half of the draw.
Under Hodgson's guidance, England had reached the quarter-finals of the last European Championship, losing to Italy on penalties, before a dismal showing at the 2014 World Cup where they went out at the group stages without winning a game.
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