Dawson, who would have won his 48th cap in a key individual battle opposite French scrum-half and skipper Fabien Galthie, has not recovered from a calf injury.
The news was confirmed when he failed a fitness test, having been unable to train with England all week.
Dawson's place in the starting line-up at Twickenham will be filled by Gloucester scrum-half Andy Gomarsall, who wins his 10th cap.
And the replacements' bench vacancy created by Gomarsall's promotion goes to 28-year-old uncapped Sale Sharks player Nick Walshe.
"Obviously, I wish Matt a speedy recovery," said England boss Clive Woodward.
"Andy Gomarsall will start on Saturday, with Nick Walshe joining the bench. Matt has been unable to train with us this week, but Andy has taken a full part in all the sessions, so we expect the disruption to be minimal. "