Ruby on Rails - "Add 'gem sqlite3'' to your Gemfile"

I had this error appear with the same version of Ruby / Rails / SQLite that you specified in your question even after confirming that my gemfile has gem 'sqlite3'. I don't know what OS you have (which is why you were down-voted probably) but I am using Windows 7 x64.

In order to get the gem to be installed in my Rails application, I needed to edit the Gemfile.lock file to replace sqlite3 (1.3.7-x86-mingw32) with sqlite3 (1.3.7)

Then, after running bundle install I finally see in the output

Using sqlite3 (1.3.7)

Upon running rails server, I (finally) see the "Welcome aboard" page.

In my case, this error "Specified 'sqlite3' for database adapter, but the gem is not loaded. Add gem 'sqlite3' to your Gemfile." message showed up, when I ran rails server right after I generated a fresh rails app. It was with Rails version 4.1.16 (Ruby version 2.3.1)

gem 'sqlite3', '~> 1.3.0'

This line in Gemfile removed the error message. I think new sqlite gem (version 1.4) has a conflict with old rails (version 4.1) but I didn't see any related issue on their Github repository. I'm adding this answer here because it might help anybody experiencing the same situation I'm in.