Terry is currently the subject of investigations by the Football Association and Metropolitan Police after he was alleged to have racially abused Anton Ferdinand during Chelsea's recent defeat at QPR.
There had been speculation that Terry could be left out of the games against Spain and Sweden, which take place at Wembley on November 12 and 15, while inquiries continue but Capello has emphasised that the player remains innocent until proven guilty.
"He will be in the final squad," Capello said. "Everyone spoke about John Terry and we decided on this - the FA and us together. Yesterday I met him personally. I spoke to him.
"We need to wait for what will happen about the FA investigation and the police investigation, but I can tell you he is innocent until proven guilty. This is a really important thing - for me and the FA. For this reason I select him."
Rio Ferdinand - brother of Anton - is not included, but Capello insists that is down to the Manchester United man's lack of first-team games this season rather than the potential for conflict.
"It's not excuses," Capello said. "It's real what happened. What did Sir Alex, who knows everything about him, say? He can see him every day during training. He needs more games."
Capello stressed that he does not believe there is an issue with racism in English football. "Look. I never see. I never heard. I never found racism problems in England football in my experience," he said. "The fans never boo. Never. Racist problems between the players do not exist."
"I don't know if he will play," Capello said. "It will only be for football reasons. I know the value of John Terry. It will be really important to know the value of other players when you play against the world champions. I need to see them because there will be injuries and suspensions so I will play Lescott or Cahill or Jagielka."
Capello already knows that his star player, Rooney, will be missing for the start of Euro 2012 through suspension after his dismissal in the final qualifier against Montenegro. As a result, the Manchester United man will be rested for the friendlies as the manager looks to find a successful alternative for the group stage next summer.
"It is a risk, but it will be very important to understand the value of the other players," Capello said. "You play against the best team in the world, the world champions and playing at Wembley.
"So two things - the pressure when it's sold out and it will be a real big test for England's ambitions."
UEFA has announced that Rooney will be suspended for three matches, but England are likely to appeal for a reduction, and Capello says the forward's acceptance of the referee's decision could be key.
"He walked - it was perfect," Capello said. "There was no question against the referee, nothing. He understood he made a big mistake and walked straight to the dressing room. That is a really important thing (for the) appeal."
Capello will hand Chelsea forward Daniel Sturridge his first call-up, while Everton midfielder Jack Rodwell and Arsenal's Alex Oxlade-Chamberlain are under consideration. Manchester United's Phil Jones is likely to be given the chance to impress in a holding midfield role having made his debut at right-back against Montenegro.