The Ballon d'Or winner, who has been struggling with a muscle problem in his left thigh, and central defender Raphael Varane (29), who is recovering from a knee issue, trained with the squad on Saturday for the first time since they arrived in Qatar.
"I am extremely sad for Karim who had made this World Cup a major objective. Despite this new blow for the French team, I have full confidence in my group. We will do everything to meet the huge challenge that awaits us," said coach Didier Deschamps in a statement.
Benzema had a stellar season with Real Madrid last season, scoring 44 goals in 46 games in all competitions as he helped guide them to a LaLiga and Champions League double.
He was France's top scorer at the 2014 World Cup, but was not part of their victory in the 2018 edition, having only returned to the France team last year following a six-year absence.
A blackmail scandal and his comment that Deschamps had "bowed to the pressure of a racist part of France" when leaving the forward, a Muslim of Algerian descent, out of the Euro 2016 squad, was followed by international exile.
Since his return to the international team, Benzema has scored 10 goals in 16 appearances.
"I've never given up in my life but tonight I have to think of the team, as I have always done," Benzema wrote in an Instagram post.
"So reason tells me to give my place to someone who can help our squad have a great World Cup. Thanks for all your messages of support."
L'Equipe said that Benzema did not last the full session after sustaining an injury, the nature and severity was later reported by Le Parisien as World Cup ending.
This was then confirmed later in the day on Twitter by the national team.
France, already without influential midfielders Paul Pogba (29) and N'Golo Kante (31) for the tournament because of injury, open their campaign against Australia in a Group D match on Tuesday.
