Veteran five-eighth Walker tweaked his quad warming up for training on Friday morning and took no further part in the session.
Dean Hawkins will replace him in the halves against St George Illawarra this Saturday for what would have been Walker's last chance to assert his Origin credentials before the Blues team is named on Tuesday morning.
Walker has been considered a serious chance to reunite with former Souths teammate Adam Reynolds in the halves for NSW, who have lost halfback Nathan Cleary to injury and must defeat Queensland on June 21 to keep the series alive.
Demetriou said Walker's injury was not serious enough to rule him out of Origin contention at this stage.
"(Walker) is every chance of being available," Demetriou said.
"It's an injury that's really short-term. It's only happened a couple of days before the game so we're not in a position to risk him but Origin's not for nearly two weeks.
"For us, we know he'll be back for the game after the bye (in round 16), which is only a few days after Origin."
The Blues' camp for Game II begins next week so it remains to be seen whether coach Brad Fittler would be willing to give Walker time to recover if the injury stretches beyond the weekend.
Walker's South Sydney teammate Campbell Graham was dismissed from camp for Game I after a long-term sternum injury affected his ability participate in the side's early training sessions.
Demetriou said the Rabbitohs' onerous fixture had likely contributed to Walker's injury; Souths are one of only three sides yet to have a bye through 14 rounds.
"The boys are creaking a little bit," Demetriou said.
"He's just an old man, just trying to stride out."
Souths fullback Mitchell missed the series opener with a calf injury and will also sit out of the Rabbitohs' clash with the Dragons.
Souths captain and Blues forward Murray misses with the groin injury he suffered against Gold Coast last week.
Both Mitchell and Murray will know before NSW teams are named on Tuesday morning whether they are fit enough to line up in Game II.
"(Mitchell) is in a good place, physios are working overtime with him as well to give him every chance to be available," Demetriou said.
"If he's able to run, he'll be ready to go. I'd love to see him out there.
"It's one of those injuries where every couple of days makes a big difference, when you've got a low-grade. We'll see how he responds. Cam Murray is the same."
