Merson explained in the Daily Star Sunday: "He doesn't look fit and that could be a big problem. Against Sweden at times he looked like he was running in treacle.
"He's had a hamstring problem and at one stage I honestly thought he was going off. I thought he'd torn it but he played on.
"Terry's a great defender and he's getting by so far because he's never isolated. Against France the midfield did a great job of protecting him and the rest of the back four.
"But when we had to attack against Sweden he got caught out a couple of times. You don't want him to get isolated like that later in the tournament or we'll get punished.
"I think he needs a rest. He should be the first player Roy Hodgson takes off against Ukraine if we go ahead in that game."