The Spain captain and goalkeeper broke a bone in his thumb during Real Madrid's Copa del Rey match with Valencia and is expected to be out for 6-to-8 weeks, which Xavi feels could prove costly to the champions.
"It's one more problem for them, he is the heart and soul of Real Madrid and their captain. He's a huge loss for Madrid and for Spain,” Xavi told reporters.
The Blaugrana midfielder also spoke of his shock at Jose Mourinho's decision to drop Casillas for the league matches against Malaga and Real Sociedad either side of the winter break.
"I speak with [Casillas] a lot, we send each other messages," Xavi said. "I sent him my best wishes as soon as he was left out of the Madrid team; I was taken by surprise by that.
"It was a shock to me that a player who has spent so many years as the No. 1 and who was always in the team could suddenly be left out, but that's their problem.
Casillas' injury means he will miss Real Madrid's Copa del Rey semifinal tie against Xavi's Barcelona, but that, coupled with the internal drama at the Bernabeu, does not mean the veteran midfielder is expecting an easy path to the final.
“It's a complicated situation, and it's not for me to give my opinion on. I read the news and I can see that the club is not in the best shape at an institutional level," Xavi said. "But they will be very difficult opponents in the [Copa del Rey] semifinals and it will be very for us to beat them."