The 22-year-old came on for the injured Jonny Wilkinson early into the second half of the match, but was carried off only two minutes later after picking up the knee injury, which looks like seeing him sidelined until around September, only weeks before the World Cup gets underway.
"I am very disappointed, but you have got to accept that things like this will happen in professional sport," said Hodgson on hearing the news.
His club coach Jim Mallinder added: "I am devastated for Charlie, more than for England and for the Sharks.
"For this to happen so early in his career when he is playing on top of his game is devastating, and it has cruelly robbed him of a World Cup place."
His likely absence from the World Cup squad now leaves England coach Clive Woodward with the problem of just who will deputise for Wilkinson at No.10 should the Newcastle star pick up a knock during the tournament, with any potential back-up player also a possibility to figure in some of the pool matches against the so-called lesser opposition.
Leicester's Austin Healey would be a strong candidate, as would London Wasps' Alex King. Northampton veteran Paul Grayson has been pulling the strings for the England 'A' team this year, and could be another option, having been called into the senior squad in the meantime.
Outside bets could include the likes of Saracens' Andy Goode, or Newcastle's Dave Walder, who has been sidelined for the whole season with a broken leg.
One thing is for sure, Hodgson's absence as a sound back-up to Wilkinson will be a big miss – Hodgson being the player who almost shattered the world points record for a major Test playing nation on his debut against Romania, only the width of a post denying him the record held by former New Zealand fly-half Simon Cullhane.
By Mark Smith