Walsh, who injured her right knee in England's 1-0 win over Denmark on Friday, has been ruled out of the match against China and will remain with the squad in Terrigal, Australia, as she continues her recovery. The FA did not provide a timescale on when or if Walsh could return.
The incident occurred in the 35th minute against Denmark as Walsh stretched for a pass. Her right knee buckled, and she immediately signalled to the bench for help. Walsh was soon stretchered off and was later seen on England's bench in the second half with a knee brace and crutches.
Walsh formed the key midfield partnership with Georgia Stanway that guided England to win Euro 2022 last summer, and with Sarina Wiegman's side already battling a lengthy injury list with Leah Williamson, Beth Mead and Fran Kirby all injured, Walsh's injury is a further setback.
Wiegman has a selection headache heading forward, with England playing China in Adelaide on Tuesday. Stanway is on a yellow card meaning if she picks up one on Tuesday then she will miss the round of 16 match.
England turned to Laura Coombs to replace Walsh on Saturday, moving Stanway back into Walsh's No. 6 role. But there are other options in the team with Jordan Nobbs and Katie Zelem other potential candidates to start in Walsh's place.
The FA statement read: "Following a scan late on Saturday afternoon, we can confirm Keira Walsh has not suffered an anterior cruciate ligament injury.
"Walsh has been ruled out of Tuesday's final Group D match against China PR in Adelaide and will remain at England's Terrigal base to continue her recovery.
"Her knee injury will continue to be assessed by England medical staff and no further update will be provided at this stage."