Reports says Rio Ferdinand will replace Terry as skipper for the Three Lions.
Capello said: “After much thought, I have made the decision that it will be best for me to take the captaincy away from John Terry.
“As a captain with the team, John Terry has displayed extremely positive behaviour. However, I have to take into account other considerations and what is best for all of the England squad.
“What is best for all of the England team has inspired my choice. John Terry was notified first.
“When I chose John Terry as captain, I also selected a vice-captain and also named a third choice. There is no reason to change this decision.
“I would like to take this opportunity to thank The FA, particularly Lord David Triesman and Ian Watmore for allowing me to make this decision in my own time and in the best interest of the team.”