De Bruyne sustained the injury in training on Wednesday, and was subsequently pictured on crutches.
City are now set to spend the Belgium international to see specialist Dr Ramon Cugat in Barcelona, who treats many of the club’s injured players.
We can confirm @DeBruyneKev has suffered a lateral collateral ligament (LCL) lesion in his right knee," City wrote on Twitter.
"No surgery is required, and the midfielder is expected to be out for around three months. Get well soon, KDB!"
The lay-off will come as a significant blow to City, who opened their title defence with a 2-0 win over Arsenal at the weekend.
De Bruyne was integral to the club's record-breaking 2017-18 season, scoring eight goals and providing 16 assists in the Premier League as City racked up 100 points en route to the title.
The Belgium international also enjoyed an excellent World Cup, as the Red Devils finished third in Russia.
City failed to sign another midfielder during the summer transfer window but can call upon David Silva, Bernardo Silva, Ilkay Gundogan and Phil Foden as alternative options.
De Bruyne's injury means he is set to miss vital clashes with Liverpool and Tottenham, while he faces a race against time to be fit in time for the first Manchester derby of the season against United, set to take place on November 11.