Southgate called James on Tuesday night and told the Chelsea defender he will not be included in his 26-man squad for Qatar, which is being named on Thursday.
The England manager does not want to risk James, who is still recovering from a knee injury he suffered against AC Milan on October 11.
James has been in a race to prove his fitness and had told friends he was confident he will be on the plane to Qatar.
He was initially ruled out for eight weeks after he sustained a knee injury and has been doing everything to be fit and last week flew to Dubai to continue his rehabilitation alongside a member of the Chelsea medical department.
But, with Kyle Walker also in a battle to be fit following groin surgery, Southgate has decided he does not want to gamble with his fitness.
Kieran Trippier is the most likely replacement for James at right wing-back in the England team.
There are further headaches for Southgate after Leicester City’s James Justin, who is a possible replacement for James, limped off in his side’s 3-0 cup win over Newport County last night.
Southampton’s versatile full-back Kyle Walker-Peters is also out with a hamstring injury.
The squad will be announced at an event at the FA’s training base at St George’s Park on Thursday. England kick off their World Cup campaign against Iran on November 21.