Terry announced his international retirement on Sunday, the eve of his Football Association disciplinary hearing on a racism charge, with the Chelsea skipper claiming the case made his position with England "untenable".
The FA have denied that is the case but Hodgson will now lose the services of Terry, one of his best players at Euro 2012.
Hodgson said: "I'd like to thank John Terry for his commitment to the England team since I became manager.
"I am of course disappointed to lose a player of John's international experience and exceptional ability.
"I have enjoyed a good relationship with John during my time as England manager and I reluctantly accept his decision.
"I can also confirm that he had the courtesy to call me prior to the announcement of his retirement from the England team.
"I'd like to wish John well for the future with Chelsea.''