The Brazilian international came off at half-time during Wednesday's 1-1 Champions League draw at Atalanta with a muscular problem.
"He's not able to play," said City manager Pep Guardiola at his pre-match press conference.
City ended that game in Milan with right-back Kyle Walker in goal after Ederson's replacement Claudio Bravo was sent off 10 minutes from time for bringing down Josip Ilicic outside his box.
Bravo endured an error-strewn first season in England back in 2016/17 when City finished third in the Premier League.
The Chilean has been replaced by Ederson as Guardiola's first-choice stopper over the past two seasons as City have won the league.
However, Guardiola rejected suggestions that Bravo will be a liability at Anfield on Sunday.
"We have another top 'keeper," added Guardiola.
"We won the Carabao (League) Cup and FA Cup thanks to Claudio. He's an exceptional 'keeper. He won a lot of games with his national team Chile too, so (I have) no doubts."