In the summer, Manchester United allowed Borthwick-Jackson to move to Molineux on a season-long loan deal, but the left-back has not featured since November 5, despite Wolves opting to keep him at the club during the January transfer window.
Wolves have lost their last six games in all competitions, but Lambert has indicated that the defender will not be appearing in his squad in the near future.
The 47-year-old told the Express & Star: "I think Cameron is falling short at the minute. He would have to show a lot more. He's doing alright in training but there's more he has to do.
"It's a bit of lack of fitness as well, even though he's played in the under-23s. At this moment in time he needs more."
Borthwick-Jackson has made just seven appearances this season.