The pair were involved in an altercation at the national team's training camp at St. George's Park, a spat believed to have stemmed from Sunday's hotly contested top-of-the-table clash at Anfield.
In a statement, England manager Gareth Southgate said: “We have taken the decision to not consider Raheem for the match against Montenegro on Thursday.
“One of the great challenges and strengths for us is that we’ve been able to separate club rivalries from the national team. Unfortunately the emotions of yesterday’s game were still raw.
“My feeling is that the right thing for the team is the action we have taken. Now that the decision has been made with the agreement of the entire squad, it’s important that we support the players and focus on Thursday night.”
Despite being out of contention for the upcoming qualifier, the Manchester City star remains a member of the Three Lions' squad.