The ex-Three Lions international turned out for both clubs during a storied 25-year career in English football, making 277 appearances for Liverpool during the 1990s before racking up a further century at City between 2004 and 2006.
Of James' team, five were also featured in fellow Matchday Live special guest Joleon Lescott's combined XI, which including eight City stars.
Interestingly, the former City stopper also included three players to follow in his footsteps and turn out in both sky blue and red during their careers.
Former Liverpool stopper Bruce Grobbelaar makes the cut in between the sticks, with Kyle Walker and Vincent Kompany both given the nod for both James and Lescott's teams at the back.
Alan Hansen lines up alongside Kompany at centre-half while utility man James Milner starts at left-back.
Gareth Barry starts in midfield with Steven Gerrard and Steve McManaman, who finished his career at the Etihad Stadium in 2005, having begun his professional journey at Anfield in 1990.
Sergio Aguero and David Silva are both selected once again, but James has opted for El Mago in a more advanced role as part of a front three with ex-Liverpool and City striker Robbie Fowler.
James will go into more detail about his combined XI ahead of kick-off on Sunday, with Matchday Live available to watch from 15:30pm (UK), one hour before the action gets underway at Anfield.
Available on all digital platforms, the show offers a unique blend of expert insight, City-centric anecdotes and plenty of laughs along the way.
Lescott and James will reconvene for a quick half-time debrief and comprehensive post-match analysis following the final whistle, assessing the result and answering viewer questions.
They will also react to the post-match thoughts of Pep Guardiola and, time permitting, a player when they reflect on our performance at Anfield.
What would your combined City-Liverpool XI be? Let our Matchday Live team know on WhatsApp: +44 7537 186538.