The lock sustained the injury in what he described as a "freak" incident in his final Super Rugby match before the test window and specialists on Monday indicated the need for an operation, which will take place on Tuesday.
"While there is still some hope that Horwill may recover in time to feature on the ... spring tour in November, it is more likely that he will not be ready to return until next year," said an ARU news release.
Horwill took over from Rocky Elsom as Wallabies captain in a shock move before Australia's departure for last year's World Cup having led the Queensland Reds to their first Super Rugby title.
His absence for the rest of the season means he will miss the inaugural Rugby Championship, which replaces the Tri-Nations from this year with the addition of Argentina.
It will also be a big blow to the Reds, who will resume their chase of the ACT Brumbies for the Australian conference title on June 29.
Horwill's replacement as captain David Pocock has led Australia to victory in the first two of three tests against Six Nations champions Wales after being upset by Scotland at the start of the international window.
The 27-year-old Horwill missed most of the 2010 season because of foot and knee injuries before returning in barnstorming form last year.