James was hurt on the first play of Wednesday's loss to Texas. He went down in a crowd while going for a rebound and left the game.
Team spokesman Steve Kirschner said the sophomore suffered a sprained medial collateral ligament in his knee. Coach Roy Williams said James would miss 10-14 days.
James has started all 10 games to bring rebounding and toughness on the interior. He is averaging 3.7 points and 4.3 rebounds for the No. 14 Tar Heels, who play Davidson on Saturday.