Walcott has endured an injury-troubled time since scoring his memorable hat-trick against Croatia to launch England's qualifying campaign in September 2008.
Shoulder, back, knee and hamstring problems restricted Walcott to just 15 starting appearances for Arsenal this term.
But after being parachuted back into the England fold for the March friendly against Egypt and then keeping his place for the recent wins over Mexico and Japan, it appeared Walcott had put fears about his form to bed.
Yet Capello has delivered his own verdict on the 21-year-old, leaving him out of a 23-man party that includes Shaun Wright-Phillips instead.
Walcott said: "I am very disappointed not to be included in the squad going out to South Africa, but completely respect Mr Capello's decision. I would like to wish the team the best of luck and hope they have a really successful tournament."