The Stoke City goalkeeper broke a finger while training with the national team on Thursday, with his withdrawal confirmed by the Football Association later that evening.
“The goalkeeper has now returned to Stoke City to be assessed by his club’s medical staff,” an FA statement read.
Butland will not be replaced by a late call-up to the squad, with one of Joe Hart and Jordan Pickford now in line to start in goal against world champions Germany at Wembley on Friday.
Southgate had already lost six members of the initial 25-man squad to injury before the news of Butland’s withdrawal.
Jordan Henderson, Raheem Sterling and Fabian Delph joined a trio of players from Tottenham Hotspur – Dele Alli, Harry Kane and Harry Winks – by pulling out earlier this week.
Danny Drinkwater was considered as a replacement for one of Henderson or Winks, but the Chelsea midfielder informed Southgate that he too did not consider himself fit enough to play.
At his pre-match press conference on Thursday, the England manager denied that the spate of withdrawals were evidence of tension between the national team and the players’ clubs.
“I'm hearing there's talk of club vs country, it's a nonsense,” Southgate said. “The players are injured and cannot play. With some of the players it's 100 per cent clear, there's a scan. With a couple of the other lads that have been in, there's ongoing injury issues with them.
“I have man-to-man discussions with them around 'where are you at with it?' 'how much risk do we want to take?' Having been a player, I am not a manager who just wants to wheel players out until they break, so I don't take risks with players. It's their livelihood, it's their career.
Southgate added: “If we're in a cup final or a critical game, maybe we have a really open conversation. But I think as a manager you have a duty of care to your players to make sure that things are done correctly.”
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