Barry has regained full fitness after suffering an ankle injury when in action for Manchester City in early May. Capello told BBC Sport: "Gareth will play this Friday. He is okay, there is no problem. He has trained very well and he is fit."
Barry was a key performer for England in the holding role during the qualifying campaign, and linked up effectively with Frank Lampard and Steven Gerrard. But the ankle problem, sustained against Tottenham at Eastlands on 5 May, left him battling to be fit for the finals.
Capello gave Barry as much time as possible to recover and he was named in his final squad of 23 on 2 June. He was not considered fit enough to feature against the Platinum Stars in the practice match nine days ago.
The 29-year-old was then listed among the substitutes for the tournament opener against USA although he was not involved. But Barry intimated on Tuesday that he was fit enough to face the Algerians and now Capello has restored him to the starting line-up. It will allow Gerrard to revert to a more attacking role on the left flank and offer support to the strikers.
Just minutes before it emerged that Barry would start, striker Wayne Rooney had welcomed the midfielder's return to full fitness. Rooney said: "We know what a player he is. He can sit and hold for us, keep the ball and he's good in possession. So he's a different option if the manager decides to choose him."
Rooney is confident England will bounce back from Saturday's disappointment. He said: "We started very well (on Saturday) and we deserved to win and overall we did enough to win the game, but unfortunately we didn't. But I am sure we will take three points on Friday."
There is a huge amount of pressure on the Manchester United forward, with many seeing his performances and goals as key to England's hopes of a first FIFA World Cup triumph since 1966, and he admits he will be looking to improve on his personal display.
He said: "We have players who can score goals for us, but for us to do well I need to play a bit better than I did and score goals. But I don't feel under any pressure, as long as the team does well."
Rooney has scored just once in his last eight capped internationals, but said: "I'm happy to be playing. I would like to score, don't get me wrong, but if I'm not scoring I will keep working until I do. So I don't worry."
Meanwhile, Emile Heskey can be entirely sure of his own place judging by comments Capello made in a separate interview with ITV. In it the Italian revealed he had two positions he had still to confirm in his own mind ahead of the Algeria clash. One was centre-forward, where he claimed Jermain Defoe was competing for a starting slot alongside Heskey, who was widely acknowledged to have produced an excellent performance against the United States on Saturday.
More predictably, Capello also confirmed he still had to decide whether to retain faith in goalkeeper Robert Green, whose horrific blunder gifted Clint Dempsey the USA's equaliser at the weekend.