England manager Southgate had been expected to drop one of the quartet from his initial 33-man provisional squad, announced last week, but Walker and James can both play at centre-half and Alexander-Arnold in midfield, helping them to edge out their rivals.
Jesse Lingard and James Ward-Prowse were among the six players dropped from the provisional squad, with Manchester United forward Mason Greenwood having pulled out on Tuesday morning due to an underlying injury.
Lingard scored nine times on loan at West Ham from Manchester United from January but was overlooked for the likes of Aston Villa playmaker Jack Grealish and Arsenal's rising star Bukayo Saka, while Southampton's Ward-Prowse also failed to make the grade.
Borussia Dortmund's 17-year-old Jude Bellingham was also included, while experience pair Jordan Henderson and Harry Maguire have done enough to prove their fitness to Southgate.
Goalkeeper Aaron Ramsdale, centre-backs Ben White and Ben Godfrey and striker Ollie Watkins were the others to miss out.
The remaining Manchester United quartet of Maguire, Dean Henderson, Luke Shaw and Marcus Rashford joined the squad on Tuesday ahead of England's first warm-up match against Austria at Middlesborough's Riverside Stadium on Wednesday.
The seven Chelsea and Manchester City players who competed in the Champions League Final are not due to join the group until Saturday, ahead of England's final warm-up fixture against Romania at the same venue.
All six dropped players are expected to remain with the squad until after the Romania match, with Southgate due to give an update on standby arrangements on Tuesday evening.
With just 10 days to go until the rescheduled Euro 2020 tournament kicks off, Southgate has little time left to put his players through their paces after a draining Premier League season.
England squad in full
Goalkeepers: Dean Henderson, Sam Johnstone, Jordan Pickford
Defenders: Trent Alexander-Arnold, Ben Chilwell, Conor Coady, Reece James, Harry Maguire, Tyrone Mings, Luke Shaw, John Stones, Kieran Trippier, Kyle Walker
Midfielders: Jude Bellingham, Jordan Henderson, Mason Mount, Kalvin Phillips, Declan Rice
Forwards: Dominic Calvert-Lewin, Phil Foden, Jack Grealish, Harry Kane, Marcus Rashford, Bukayo Saka, Jadon Sancho, Raheem Sterling