A source told ESPN NFL Insider Adam Schefter that Luck had an MRI earlier this week that revealed a bruise.
Pagano said he remains confident Luck will play Sunday.
"It's trending the right way," a source told Schefter.
Luck, who injured his shoulder against the Tennessee Titans in Week 3, was limited in practice Wednesday and Thursday. Pagano said the quarterback was limited again Friday despite not being on the field during the time the media was allowed to watch practice.
"He looked good when he was out there," said veteran Matt Hasselbeck, who would start in Luck's place if he doesn't play.
Another factor in the Colts' decision will be that Sunday's game against the Jaguars is followed by a Week 5 Thursday night game against the Houston Texans.
Luck has not missed a game or snap because of an injury in his four seasons in the NFL. The last game he missed for an injury was the 2009 Sun Bowl, because of a broken finger while at Stanford.
The Colts also signed journeyman quarterback Josh Johnson on Friday. But Hasselbeck said he doesn't think practice reps, or lack thereof, will affect Luck's availability for Sunday.
"He is a QB that is talented enough and experienced enough that he doesn't need to practice to play," Hasselbeck said.