According to highly placed sources, the 32-year-old is not yet fully recovered from a thumb injury and will leave the bio-bubble and head home tomorrow.
Karunaratne had sustained the injury during the South Africa tour and on the eve of the first Test in Galle was diagnosed with a fractured thumb.
The team management was initially contemplating whether to play him with painkillers but it has now decided to leave him out of the squad.
Dinesh Chandimal will continue to lead the team in the absence of Karunaratne.
On Tuesday, the team management will also discuss releasing a few more players and may not have the full squad of 22 players, as it does right now, for the second Test.
Oshada Fernando, who sustained an ankle injury during the Lanka Premier League (LPL) and had to miss both Tests against South Africa and the first Test against England is almost recovered and has a good chance of playing the second Test, it is also learnt.
The second Test will be played at the same venue (Galle International Cricket Stadium) from January 22.