Euro 2012 - Sorensen suffers heartbreak
He will be replaced in the squad by Kasper Schmeichel, whose father Peter played a key role when Denmark won the European Championship in 1992.
"It's a tough decision I had to make, and it's a serious blow for us sportingly," Olsen said, adding that the uncapped Schmeichel will be adequate backup for Stephan Andersen and Anders Lindegaard.
"He (Schmeichel) has worked very seriously on his development as a goalkeeper, and we have followed him closely during the season at Leicester."
Sorensen was substituted in the first half of the 3-1 defeat by Brazil and was replaced by Andersen who is likely to start in Denmark's Group B opener against Netherlands on June 9.
Olsen, who named a preliminary squad on May 16, gave the final outfield places to Groningen striker Niclas Pedersen and 19-year-old central defender Jores Okore from new Danish champions FC Nordsjaelland.
Defenders: Lars Jacobsen (FC Copenhagen), Simon Poulsen (AZ Alkmaar), Daniel Wass (Evian Thonon Gaillard), Simon Kjaer (AS Roma), Daniel Agger (Liverpool), Andreas Bjelland (FC Nordsjaelland), Jores Okore (FC Nordsjaelland)
Midfielders: William Kvist (VfB Stuttgart), Christian Poulsen (Evian Thonon Gaillard), Niki Zimling (Club Bruges), Jakob Poulsen (Midtjylland), Lasse Schone (NEC Nijmegen), Tobias Mikkelsen (FC Nordsjaelland), Michael Krohn-Dehli (Brondby), Thomas Kahlenberg (Evian Thonon Gaillard), Michael Silberbauer (Young Boys)