Reports in the player's native Colombia broke the news, with Win Sports TV's Pipe Sierra taking to Twitter to share the news.
Diaz, who has starred for Liverpool in a relatively drab season for the Reds thus far, was removed from play at the Emirates earlier this week just before half-time.
The Colombian was struck down with a suspected knee injury, which has now been confirmed.
A return date for Diaz has not been established, but he is expected to sit out the remainder of the year.
Sierra reports the Liverpool forward will be sidelined for at least six weeks, but will then need to take his recovery to the training field. Diaz does not require surgery.
More information is expected in due course.
Colombia failed to qualify for the World Cup in Qatar this year, so Diaz can focus his efforts entirely on returning for Liverpool.
The Reds are next in action again later this week against Rangers in the Champions League.
