
Tennis Australia confirmed that the two-time Grand Slam finalist will undergo immediate surgery for a tear in the cartilage of his right knee.
Philippoussis said he had been feeling a bit of pain in his knee during his training in Australia in the lead up to the Australian Open wild card play-off, where he won one match, lost one and failed to play a third.
The veteran who has gone under the knife on multiple occasions for knee problems on both sides, damaged his right knee further on Saturday in an opening win over teenager Brydan Klein.
"I'm bitterly disappointed because I really wanted to play in Australia this summer," Philippoussis said. "They tell me it can be fixed.
"My initial reaction is I want to get the surgery done and then work on getting back on the court as soon as I can."
Klein, the 2007 Australian Open junior champion will replace Philippoussis as a lucky loser in the play-off, with champions on the men's and women's side earning wild card entries into the Grand Slam starting January 14.
Philippousssis, winner of 11 titles, has had a patchy few seasons, his ranking falling out of the Top 200 due to injury and lack of play.
He last played a professional match last January, injuring a knee at the Hopman Cup and undergoing an operation. He was beaten by John McEnroe in a one-off senior event appearance in October in Dallas.
The latest drama puts an end to his quest for an appearance at the Australian Open.