EurosportPayne suffered a cartilage tear ten minutes into last week's victory over Brisbane but had remained hopeful of facing Manly in Friday night's elimination semi-final at Allianz Stadium.
The Cowboys said in a statement that Payne, who had already planned to retire at the end of the season, would not feature again in the finals series to mark the end of his 219-game NRL career.
The 29-year-old is replaced in the starting line-up by Penrith-bound rake James Segeyaro while Anthony Mitchell becomes the team's likely bench utility.
