James was punished for conceding possession inside his penalty area
Portsmouth were eliminated from the Uefa Cup after losing to Wolfsburg.
The hosts took a third-minute lead when Edin Dzeko scored from close range but Jermain Defoe took advantage of a mistake to level on 11 minutes.
Arnold Mvuemba's deflected shot gave Pompey the lead before Christian Gentner's cross-shot levelled terms.
An error by David James left Zvjezdan Misimovic to slot into an open goal, although the Pompey keeper did save the Bosnian playmaker's late penalty.
Tony Adams' side needed a win to give themselves any chance of qualifying and their defeat, along with Braga's victory at Heerenveen saw them crash out of the competition.
Neither side had the better of a first half that ebbed and flowed as both defences struggled to cope with the pace and movement of the opposition forward line.
And Portsmouth's hopes of qualifying for the knockout stages looked to have been dented when they conceded after just three minutes.
Neat skill from winger Gentner on the right tricked Sol Campbell, and the German's teasing cross was easily tucked away by Bosnian striker Dzeko to give the hosts the lead.
However, the scores were level soon when on-loan Arsenal wide man Armand Traore's cross-shot was fumbled by keeper Diego Benaglio, leaving Defoe to level with his 10th goal of the season.
And to the surprise of the home crowd, Pompey took the lead just moments later when Mvuemba, in the side at the expense of Peter Crouch, struck a shot that took a wicked deflection before nestling in the Wolfsburg net.
The game took another twist on 23 minutes when Wolfsburg's Gentner whipped in a cross from the right, which caught James in two minds, and sailed in to level the scores.
Pompey were indebted to James for keeping the scores level at the break on 43 minutes when he palmed Dzeko's snapshot after good work from compatriot Misimovic.
The second half failed to ignite in the same explosive manner as the first, in part down to the departure of the lively Nadir Belhadj for Noe Pamarot, whose left-wing bursts were key to Portsmouth's attacking threat.
The visitors were inches away from regaining the lead when Niko Kranjcar's 51st-minute free-kick crashed off the crossbar and away to safety.
Adams introduced Crouch on 65 minutes for Muvemba as the visitors went in search of a winner.
However a howler from England number one James changed the complexion of the game and left the Premier League outfit staring at an early exit.
The 38-year-old gave the ball away in his own penalty area and Misimovic made no mistake from close range.
With Portsmouth looking ragged, they then gave away a penalty when Campbell tripped the dangerous Dzeko. But the spot-kick from Misimovic was saved by James to give the visitors hope.
As time ticked away the visitors could find no way through the Wolfsburg rear-guard and crashed out of the competition with just one point from three games.
Portsmouth manager Tony Adams on the performance and goalkeeper David James:
"I'm disappointed, we made mistakes, but Wolfsburg are a very good outfit, it's counter attacking at its best.
"They sit there and wait for you and if you give the ball away then they pounce.
"I'm going to take the positives out of the game, at times we looked sharp and created a few chances and if the shot from Niko [Kranjcar] goes in that hit the bar then who knows.
"David is a fantastic goalkeeper, he's saved us penalties and he has set up the first goal.
"I've got great faith in him and I love him to bits.
"He's been in the game a long time and there's nothing I can say to him."
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