Dembele picked up the injury during France’s 1-1 draw with Hungary on Saturday and had to be taken off 30 minutes after coming on as a second-half substitute.
The Barcelona forward duly underwent scans at a hospital in Budapest on Sunday and they have confirmed the worst.
Dembele has suffered a knee injury and he will not be able to recover in time to play any further part at Euro 2020 so will return to his club.
“Ousmane Dembele had an X-ray at the Budapest hospital on Sunday night,” the French Football Federation said in a statement this morning. “The recovery time is incompatible with him staying in the squad.”
World Cup winners France are currently unbeaten at the tournament and are top of Group F going into their final game against Portugal on Wednesday night.