James has missed more matches than he has played for both club and country this season after suffering a serious knee injury, along with a further setback and is now delicately managing a hamstring issue.
The right-back was a key player for England before his run of injuries, starting in all four matches before the World Cup.
Unfortunately, he is unavailable to stake his claim against Ukraine at Wembley on Sunday and Southgate gave full details of James' withdrawal in his pre-match press conference.
“Reece has gone back, he’s not completely happy with how his leg feels,” Southgate said. “He was a little bit concerned about that earlier in the week.”
Chelsea have struggled without one of their most important players this season, leading to manager Graham Potter seeking alternative options on the right side of defence.
Southgate has no long-term concerns about James’ fitness, insisting that eventually he will overcome his run of injuries.
He added: “I think, probably for him, the injury after the injury that ruled him out of the World Cup has made him a little more cautious at this moment in time. It probably needs some time.
“It is not unusual to have a serious injury and then smaller injuries on the back of that. With Reece, it is a case of building his resilience to load and him being comfortable with that.
“With him, the club tends to play a game and we are a bit more cautious on the next one. He is a really good player and he has got absolutely everything and could be anything he wants to be. This is a temporary thing and hopefully he can overcome that pretty quickly.”
Luke Shaw will also miss England’s match on Sunday after receiving two yellow cards against Italy. And Southgate says the door is open for a fit-again Ben Chilwell at left-back.
He said: “Yes, he is ready, without a doubt. We have to be mindful of what his attributes are compared to a Luke Shaw or a Kieran Trippier. Very good in the attacking third of the pitch, for example. He likes to play high.
“He is playing as a wing-back so there is some adaptation for him if we are playing with a four. It is a different role, defensively, in particular.
“But he is ready and physically, he is in really good shape. He has had a couple of setbacks but he is a good athlete and I think that would have helped his recovery, definitely.”
Southgate also explained his stance on Marcus Rashford going on holiday to New York after withdrawing from the England squad due to a knock.
“I was asked the other day did we miss him and it was semantics of words really because he’s in good form, we’d love to have had him as an option for this camp but we haven't got him,” he said.
“Once he’s ruled out of the squad, it’s entirely up to him how he spends his time, the players don’t get a lot of breaks.”