Henderson was one of three goalkeepers in Gareth Southgate’s squad alongside Jordan Pickford and Sam Johnstone.
Ramsdale was initially named in England’s preliminary 33-man squad but missed the cut when it was trimmed down to 26.
The 23-year-old was an ever-present for Sheffield United in the Premier League last season but could not prevent them from getting relegated to the Championship.
"Aaron Ramsdale has replaced Dean Henderson in England’s UEFA EURO 2020 squad," an official statement from the Three Lions camp reads.
"Henderson withdraws with a hip issue that would continue to limit his involvement in training throughout the tournament.
"Under UEFA regulations, squads are permitted to replace goalkeepers on medical grounds at any stage.
"The Manchester United goalkeeper will now return to his club for further assessment and rehabilitation ahead of the 2021-22 season."
England began their EURO 2020 campaign with a 1-0 victory over Croatia last Sunday and face Scotland in their next game on Friday.
