"James has a real opportunity to show what a quality player he is," said Gatland.
"There is a certain amount of risk involved as he has not started a game at fly-half this season, but the decision was made easier considering Stephen has been limited in what he can do in the early part of this week after the bump he picked up early on against England."
Up front Ryan Jones (also Ospreys) returns to the back row in place of injured Wasps No8 Andy Powell (shoulder), with the coaches saying 'same again' to the rest of the pack.
"The forwards were in a battle last week, but there were plenty of things that went right and we want them to go up to Murrayfield and give it a shot," said Wales assistant coach (forwards) Robin McBryde.
"Our front five was an asset in the Autumn and Craig Mitchell has come in and done well and helped give us platform off the scrum and line-out. We have talked about better execution and accuracy but largely we want the same again from the forwards with Ryan (Jones) coming back into the mix as well.
"Ryan has shown his true character after some set backs in terms of selection and playing in different areas of the pack and he has come out on top."
On the bench two players, back row Josh Turnbull and fly half / full back Rhys Priestland (both Scarlets), could gain their first caps - with Turnbull replacing the promoted Jones and joining Jonathan Thomas and Richard Hibbard (Ospreys) and John Yapp (Blues) in providing the forward cover.
Elsewhere fellow Scarlet Tavis Knoyle covers the scrum half position in place of Sale Shark's Dwayne Peel, with Peel unable to train after pulling up with a sore hip training yesterday (Monday).
"Last week in the first half we struggled for field position, which meant we didn't attack in the way we would have liked and we are hoping to put that right this week," added McBryde.
"We know we are under pressure, but the pressure we put on ourselves is more than enough and there is no-one working harder than us to put things right.
"We need to maintain our accuracy under pressure, look after the things we can control on the field on Saturday and we will not be far away."
WALES: Lee Byrne; Morgan Stoddart, Jamie Roberts, Jonathan Davies, Shane Williams; James Hook, Mike Phillips; Paul James, Matthew Rees (Capt), Craig Mitchell, Bradley Davies, Alun Wyn Jones, Dan Lydiate, Sam Warburton, Ryan Jones
Replacements: Richard Hibbard, John Yapp, Jonathan Thomas, Josh Turnbull, Tavis Knoyle, Stephen Jones, Rhys Priestland
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