Herd suffered an injury to his Achilles tendon at training last Monday, prior to Australia's clash against Oman the next day.
Socceroos medical staff treated Herd but decided there was no prospect of him returning later in the tournament.
Herd can't be replaced, reducing Australia's squad to 22 players.
"It's disappointing for the team and especially for Chris that he is unable to continue," Socceroos coach Ange Postecoglou said in a statement on Thursday.
"It has been determined it is in Chris' best interests that he returns to Aston Villa for rehabilitation to ensure he can get back on the pitch."
Herd was overlooked for Australia's tournament opener against Kuwait before suffering the injury.
