The Blancos confirmed on Tuesday that the midfielder will undergo an operation due to the problem.
And therefore Isco will be absent when Real travel to take on Sevilla at the Ramon Sanchez Pizjuan on Wednesday.
Real have failed to win any of their last four trips to Sevilla in all competitions, losing three of those games, and the loss of Isco is a blow in their attempts to reverse the formbook.
A brief statement on Real's website read: "After the tests performed on our player Isco, he was diagnosed with acute appendicitis.
"The player will be operated on in the next hours."
Madrid coach Julen Lopetegui did not give a timetable for the Spain international's return, but it appears unlikely he will be fit for the derby at home against Atletico on Saturday.
"Hopefully it's a speedy recovery. When a player's out it's always bad news and we wish him a speedy recovery," Lopetegui told a news conference.
"We've got a good squad and somebody else will have to play. I have total confidence in the rest of my players.
"I have not been able to talk to him. He's about to go into surgery. I hope he can quickly get back into shape."
Dani Carvajal did not train with his Madrid team-mates on Tuesday and could also be set to miss the clash with Diego Simeone's side.
"We'll see [if Carvajal will miss El Derbi]. He had an overload and has not improved as we expected," said Lopetegui, who confirmed he will sit out the match in Andalusia.
"We have to wait. He will not play against Sevilla. It's an injury you have to look at day by day.
"Injuries will happen. In this case it's been unfortunate, but they are normal. We have to face them with a level head and with confidence in the player who comes in."
Lopetegui's side have made a strong start to the new Liga season, though, winning four and drawing one of their opening five games.
And Isco has impressed in Real's first few games, netting a crucial equaliser in the 1-1 draw with Athletic Club on September 15.
Sevilla, on the flip side, are seventh in the table and will head into their clash with joint-leaders Real on the back of a 6-2 win over Levante.