"He [Alli] started training with the rest of the group and then did some more running on his own, so he's progressing really well. We're really pleased with where he is at, but he wouldn't be ready for the game," Southgate said, as quoted by Sky Sports website.
England will face Panama in Nizhny Novgorod on Sunday. The game will kick off at 15:00 Moscow time (12:00 GMT).
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The Three Lions recorded a narrow 2-1 victory against Tunisia, while Panama lost 3-0 to Belgium in teams' first World Cup matches. Both games were played on Monday.
The 2018 FIFA World Cup kicked off on June 14 and will continue until July 15, with the matches being played in 11 cities across Russia.