The 22-year-old, who won medals in the sprint and 500m time trial in the 2010 Delhi Games, has revealed that she aggravated a knee injury following a rest period in May.
"The reason for this is a knee injury sustained following a period of medical rest," said James. "In May, I received abnormal results from a routine smear test, and following the biopsy results I underwent minor surgery which I'm pleased to say was successful.
"The surgery, however, meant two weeks away from my usual training regime. Following the rest, in an effort to make up for lost time, I aggravated a knee injury that will rule me out of the Games.
"I'm terribly disappointed I won't be competing in Glasgow, I still hope to be in Glasgow cheering the team on, and wish the entire team the best of luck."
Welsh Cycling has a target of three medals for the Games.