Yardy quit the tournament, citing depression, following which the English team management asked for a replacement.
England take on Sri Lanka [ Images ] in the tournament's last quarter-final on Saturday.
Rashid, who is in the West Indies [ Images ] playing for England Lions, will join the team the same day.
The event's Technical Committee approved the replacement.
"The confirmation was conveyed to the England and Wales Cricket Board on behalf of the committee on Thursday. Yardy was withdrawn from the England squad suffering from depression and has consequently returned to the United Kingdom," read an ICC [ Images ] statement.
Rashid, a leg-break spinner with Yorkshire, represented England in five ODIs, claiming three wickets, and five Twenty20 [ Images ] internationals.