Gerrard picked up the injury during Saturday's 1-0 defeat in Ukraine and limped out of Tuesday morning's training session early.
England boss Fabio Capello said: "He didn't finish training because the pain was the same as on Monday. He's going back to Liverpool."
James is also a doubt for Wednesday's Group Six clash at Wembley after missing the session at London Colney altogether.
"He had some problems with his knee," said Capello. "He's getting better, he'll stay with us and on Wednesday we'll decide.
"I will speak with him on Wednesday.
"The other players are fit. There are some little problems but not so big to be a problem."
Also missing from Wednesday's game will be Wayne Rooney, who withdrew on Sunday with a calf injury.
Capello is viewing the Manchester United striker's absence as a good opportunity to test out the rest of his squad, with Aston Villa forward Gabriel Agbonlahor widely expected to start.
He said: "Rooney is a very important player for us and also for United but the result is we'll play a different style, with some different players and it will be a very interesting game for me.
"I will know some players better.
"I have big confidence in all the players. Rooney is important because his style is the style I like in my team, but we have other important players. We can win with Rooney and without Rooney."
Asked whether he would be tempted to experiment in a final qualifier which is no more than a dead rubber, Capello replied: "It's possible you'll be surprised."
Capello also backed Rio Ferdinand to bounce back from the error which led to Robert Green being dismissed on Saturday.
Asked if he was concerned about Ferdinand's form, he said: "No. Rio will play. I have big confidence in Rio, he needs to play and I'm sure that Rio will get better every game."
Capello admitted he was not too worried about the result of Wednesday's game.
"I think the games in March and May will be more important to arrive at the World Cup with good morale," he said.
England skipper John Terry acknowledged that losing Rooney was a blow but believes it is an opportunity for others to stake their claim for a place in the World Cup squad.
"We have seen what a big player Wayne is for the side," Terry said. "He has been the heartbeat of the campaign and he has been in great form.
"He is going to be sorely missed on Wednesday but it is a chance for other players to come in and make their case to be on the plane."
Agbonlahor is one player who could benefit from Rooney's absence and club team-mate Emile Heskey can help him to shine, according to Terry.
"People talk about his goalscoring but Emile offers a lot more than that. He is very hard to play against and his link-up play is fantastic," said Terry.
"He has helped bring out the best in Wayne in the past and it is a chance for him to help someone else."
Terry also insisted that there is no chance of complacency creeping in among the England regulars.
"Even players who have been playing regularly feel under threat because if we are not playing well the manager is strong enough to drop us," he said.