The decision to rest the 29-year-old was not unexpected as he has endured a hectic schedule since last year's World Cup.
James has since played a full season with English club side Bath and, after two impressive performances in the
Springboks 2-0 series victory against Wales, will rest ahead of the upcoming Tri-Nations.
"Butch has played almost non-stop since the World Cup and we felt it was time that he should take a break," said Andy Marinos, the South Africa manager for national teams.
James' omission means the Springbok will field their third half-back combination in as many weeks.
In the first Test against Wales James was paired with scrum-half Bolla Conradie, before combing with Ricky Januarie in Pretoria.
Stormers fly-half Peter Grant is expected to take James' place.
Veteran lock Victor Matfield will lead a Springboks team that will show a number of changes from the team that defeated Wales last weekend.
Regular captain John Smit and experienced full-back Percy Montgomery will return to France to play in the Top 14 semi-final between Perpignan and Clermont.
World Cup-winner Danie Rossouw will also miss the game as he will undergo treatment on an ingrown toenail and is expected to take 10 days to recover.