The Blues skipper has been hit with a charge of using racially abusive language towards QPR defender Anton Ferdinand by the FA.
If found guilty, Terry could face a long match ban similar to that of Liverpool forward Luis Suarez, despite being acquitted of the charges in a criminal court.
"I'm hoping, and I make no secret of that, the case will take its course; that John, hopefully, will be freed, as he was freed in a court of law, and will carry on playing for England," Hodgson told reporters ahead of England's friendly against Italy.
"That's my hope. What will happen, I have no idea. As a member of the FA, it's a sub judice situation and I'm not prepared to say any more."
Hodgson praised the former national team captain's form at Euro 2012 but conceded that the outcome of the case was out of his hands.
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The former West Brom boss was reluctant to be drawn further on the matter in fear of influencing the case's outcome, despite revealing his support for the 31-year-old.
"I thought John did well in the Euros and I'd like to keep using him, but this is a case which is way out of my hands," he remarked.
"John understands that. All I can do like many of his supporters, I suppose, is just hope he gets freed and can continue to play.
"It's a matter which is really as far as I am concerned working for the FA sub judice. Everthing I say can be misinterpreted.
"As far as I am concerned, he has a case to answer with the FA and I'll wait and see what happens."