City's left-back suffered a knee injury during Sunday's Manchester derby win over United.
And he will no longer play a part in upcoming matches against the Netherlands and Uruguay.
Mendy has been in superb form for Pep Guardiola's Premier League champions this season.
And he has decided not to take any risks by making himself unavailable for the world champions this month.
Mendy becomes the third English-based player to drop out of Didier Deschamps' squad, with Manchester United duo Paul Pogba and Anthony Martial also withdrawing.
Pogba missed the 3-1 defeat to City after pulling up in United training last week, while Martial received a knock during the game at the Etihad.
Arsenal striker Alexandre Lacazette had been called up as a replacement for Martial.
But he rejected Deschamps' request in order to nurse a problem suffered during the 1-1 draw with Wolves.
However, Spurs' Moussa Sissoko is back in favour after impressing for Mauricio Pochettino's men in recent weeks.
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