Ibisevic, who has scored 18 goals in the league this term, was injured in a training match against Hamburg in Spain on Wednesday.
The injury is a major blow to the surprise league leaders with the Bundesliga resuming in just over two weeks.
In a statement on their website, Hoffenheim said Ibisevic was checked on Thursday by doctors in Germany who said he had indeed torn his ligament and could now be sidelined for several months.
"Unfortunately the first diagnosis immediately after the match proved to be right. With the torn ligament he now faces a months-long break," the club said.
The Bosnia international had to come off in the 82nd minute after being injured earlier in Hoffenheim's 2-0 defeat by Hamburg. He had played on injured for several minutes, the club said.
Hoffenheim, in their first Bundesliga season, have been the league's surprise package, topping the standings at the halfway mark with attractive, free-scoring soccer to leave champions Bayern Munich second on goal difference.
Ibisevic, 24, largely unknown at the start of the season having joined Hoffenheim when they were in the second division, had been outstanding so far netting 18 goals in 17 league matches to help turn the newcomers into title contenders.
"This is a major setback. We hope he can come back as quickly as possible," teammate Tobias Weis said.
Coach Ralf Rangnick had said earlier on Thursday the club would seek to bring in a proven striker during the transfer period ending in late January if the injury was indeed as serious as initially feared.
"If Vedad is not at our disposal for the second round of the season then we would need to become active on the transfer market," Rangnick said.
