The Chelsea captain quit the national side on Sunday night ahead of his Football Association hearing into alleged racial abuse of QPR defender Anton Ferdinand last October, claiming his position in the national side had become "untenable".
The 65-year-old wished the defender well in his future at Stamford Bridge and revealed that Terry had broken the news to him personally.
A statement from Hodgson read: "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.
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"I'd like to wish John well for the future with Chelsea."
A statement from the FA also echoed Hodgson's sentiments, with Terry having captained the Three Lions twice in his career, with both spells ending in controversial circumstances.
The statement said: "Following his announcement that he is retiring from the England team, The FA would like to thank John Terry for all of his efforts with the national team over the past decade.
"During his 78 appearances John has always given his full commitment to the team."