McCarthy, 21, made one appearance during qualifying and had been tipped to travel to Poland and Ukraine after some impressive performances for Wigan.
However, his father's health problems led to the midfielder deciding against making himself available for the 23-man squad, which was announced by manager Giovanni Trapattoni on Monday.
Sunderland winger James McClean, who broke into the first team under Martin O'Neill in January and made his international debut in a friendly against Czech Republic in February, has won a place in the squad after much public clamour for his inclusion.
Everton's Seamus Coleman has only been named on standby while Norwich midfielder Wes Hoolahan misses out entirely as Trapattoni sticks with the vast bulk of the squad that took Ireland to their first major tournament since the 2002 World Cup.
McCarthy said in a statement: "I have made the difficult decision to withdraw my name from selection for the Euro 2012 squad following the diagnosis of my father with cancer and on-going requirement for treatment.
“I have discussed this with the manager. He was very understanding and I thank him sincerely for that.
“I take this opportunity to re-affirm my complete commitment to playing for the Republic of Ireland. It is a huge honour and source of great pride for me and my family.
“Despite not being present, I would like to wish the manager and my team-mates every success in the tournament and hope that Irish fans can understand the reason for my decision at this difficult time.”
Midfielders: Glenn Whelan (Stoke), Darron Gibson (Everton), Keith Andrews (West Brom), Keith Fahey (Birmingham), Damien Duff (Fulham), Aiden McGeady (Spartak Moscow), Stephen Hunt (Wolves), James McClean (Sunderland)