The Stourbridge MP and Digital Minister described the Prime Minister's treatment at the hands of fellow Tories as "regrettable", insisting that the only way to deliver any Brexit deal would be through politicians from all sides of the House coming together.
Ms James said: "It’s all very regrettable, but she’s being hounded out of office because Parliament will not make a decision and the parties just have an inability to compromise. But in the end there’s got to be a compromise."
Ms James, who earlier this year threatened to quit government unless a 'no deal' Brexit was ruled out, is part of the 'One Nation' group of Conservative MPs aiming to push centrist values in the party.
The group, which also includes Work and Pensions Secretary Amber Rudd, is committed to stopping so-called 'hard' Brexiteers such as Boris Johnson and Dominic Raab from winning the Tory leadership contest.
Ms James said: "I think it would be difficult for a candidate who would let the country leave without a deal to subscribe to quite a lot of those values and the policies that flow from them."
She added that while she believed few candidates would back 'no deal', "there are candidates who will go out of their way to make sure the country doesn't leave without a deal and that is what we need to ensure we get out of this leadership contest."