"It's got worse in recent days, despite physio treatment," said a statement on Wednesday from the Uruguayan camp at a resort in countryside outside Belo Horizonte.
"He's ruled out for the England game."
The affable Lugano, 33, had spoken to reporters on Monday sounding upbeat and determined before the game in Sao Paulo that both teams view as a must win given they lost their respective openers. "It's life or death," he had said.
Uruguay lost 3-1 to Costa Rica in a major upset, while England were narrowly beaten 2-1 by Italy during a tight contest in one of the toughest groups.
With 95 caps and nine goals for Uruguay, Lugano's forceful character and style of play make him a dominant member of the team, so his loss is a big blow for coach Oscar Tabarez.
Striker Luis Suarez missed Uruguay's opening game as he was regaining fitness after knee surgery. But he has declared himself "100 percent" and is likely to figure against England even though Tabarez is keeping mum on Suarez's prospects.
(Editing by Justin Palmer)
