Rooney headed in Gerrard’s corner in the sixth minute but Damjanovic fired home after a goalmouth scramble with 13 minutes left to secure a point which keeps Montenegro top of Group H and two points clear of England.
Roy Hodgson’s men were by far the superior team before the break but failed to convert their dominance into a second goal.
And captain Gerrard was frustrated by the Three Lions’ slow start to the second half in Podgorica.
“We stopped playing after the break for 20-30 minutes and away from home you can’t afford to do that,” Gerrard told ITV1.
“We stopped passing the ball and that’s when we lost control. They deserved the equaliser.
“There was a lot of experience out there and I think in the first half we showed that. We completely controlled the game.
“The problem is, at 1-0 you’re always vulnerable. You’ve got to go on and get that second goal to get complete control. We didn’t do that and they took control of the second half up to the last 10 minutes, so they deserved a draw.”
Gerrard added: “We’re still confident we can finish top of the group. We need to win all of our games and we certainly need to improve on the second-half performance and play like we did in the first half.”
England boss Hodgson echoed his captain’s sentiments after the final whistle but felt his side could have snatched a late winner.
He said: “Our first half was very good but we obviously didn’t start the second half as well as we would have liked to and that gave Montenegro some encouragement.
“But we hung on well and even finished the game quite strongly. All things considered, we mustn’t be too disappointed.
“There’s a long way to go yet and a draw here is something that gives us a chance to build for the future.”