Sutton resigned as British Cycling's technical director in April on the same day it was announced he had been suspended pending an investigation into claims of bullying, favouritism and using offensive language.
His departure brought an end to a hugely successful 14-year involvement with British Cycling and left the Olympic and Paralympic set-up without its most senior coach 100 days before the start of the Games.
"Yes, he will be missed," admitted James.
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"It was a hard few days when he first left and it was tough for the whole programme.
"But we had to move on and I had to knuckle down and get on with my training, knowing it would be a journey without him but I still had to get in the best possible form before Rio."
The 24-year-old Welsh sprinter is particularly grateful to Sutton as he was crucial to keeping her in the sport during a torrid two-year spell that saw her overcome serious knee and shoulder injuries and a cancer scare.
Having won world keirin and sprint titles in 2013, James almost quit in 2015.
"Shane was the one who always believed in me getting back," said James, who also missed London 2012 because of illness and injury.
"He said to me: 'You don't have to do this, you have already achieved a lot and you can be happy with what you've done.'
"That gave me that bit extra to want to come back.
"It's not that I wanted to prove him wrong - he always believed in me, even when I was doing terrible and getting knocked out in the first round of races - but I had lost hope in myself.
"He was the one who could see it, when I couldn't. He kept me on the programme, kept me working hard.
"Don't get me wrong, there were times I could have happily packed it in, when I couldn't imagine riding without pain again.
"But I managed to get past that and I had so much support from British Cycling, they wanted me to get back - that's what kept me going."
James, who was speaking ahead of a training session at the National Cycling Centre in Manchester, admitted that Sutton's "straight-talking" could upset others but said she did not think he was a bully.
"He's always been brutally honest with me but the truth is better than lies," she added.
Sutton's faith in James paid off at the world championships in London in March when she came through the fastest losers' route to win a gutsy bronze in the keirin, only five months after returning to racing.
"Winning that bronze felt like a gold medal - it was up there with winning my two world titles because there had been times when I could never have seen myself back on a world podium again," said James.
She can now look forward to Rio confident in her form and fitness, having completed the best block of training she has put in since 2013.
James' final race before the Games was at the Grand Prix of Poland last weekend but she sat up in the final after a rival almost took out her wheel.
But double Olympic champion Laura Trott completed another victory in the multi-discipline omnium and James believes that bodes well for a British team that has topped the cycling medal table at the last two Olympics.
"Everybody is going well, especially the team pursuiters, they've got such strong teams, with so many people going for those spots," she said.
"And Laura Trott is just phenomenal, always winning the omniums - touch wood she can keep that going.
"Then you've got the men's sprint getting better every day.
"It's a bit harder without (the retired) Chris Hoy but we've still got Jason Kenny and I'd like to think we can win lots of medals."
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