The 34-year-old fractured the tibia just below his left knee in a Bundesliga match against Hannover last month, but a further examination has revealed more bad news.
The defensive midfielder now needs to wear a protective cast for the next four to six weeks to allow the injury to heal.
"The injury is more serious than thought and as a result Michael will be unavailable until the end of the year," said his club Bayer Leverkusen in a statement.
Ballack picked up the injury on only his third game back after damaging ligaments in his right ankle last May which kept him out of the World Cup finals.
Having spent four years at Chelsea, Ballack returned to the German league this season with Leverkusen, but the latest set-back is a blow to both his club coach Jupp Heynckes and national trainer Joachim Löw.
"This development is very unfortunate. But I hope that Michael Ballack will return stronger after his rehab and we can focus on his return for the second half of the season," said Heynckes.
With 98 caps to his name, Ballack has already missed Germany's first two Euro 2012 qualifiers and sits out Friday's game against Turkey in Berlin and next Tuesday's match against Kazakhstan in Astana.
Ballack will also miss Germany's friendly against Sweden in Gothenburg on November 17, but Germany team manager Oliver Bierhoff urged the captain 'not to worry' about his latest setback and says he will come back stronger.
"Of course, it is another setback both for Michael and especially for Bayer Leverkusen," said Bierhoff at a press conference in Berlin. "He will get a longer break now. That will be good for him. Then he can attack again with renewed energy."