The highly publicized undrafted rookie has tears of both his medical collateral ligament and posterior collateral ligament, according to sources familiar with the injury.
Neither injury will require surgery, but he won't be back before the end of the preseason.
"I don't think I'll really find anything out until the cut day," Lyerla said this week. "But I know they can't cut me without some kind of injury settlement. If I'm out long enough, then it might be a big enough settlement where it might make more sense for them to just keep me if they're going to spend all that money anyway."
The Packers took a chance on Lyerla, who last played football in October 2013 before leaving the University of Oregon in midseason. He then ran into legal problems that ruined his chances of getting drafted.
The Packers brought him to their rookie camp in May on a tryout basis and eventually signed him to a contract.
Lyerla had not shown enough to warrant a roster spot, but the Packers were hoping to see whether he could develop on the practice squad. In order to re-sign him on the practice squad, they would have to release him and wait for him to clear waivers.
However, NFL rules prohibit teams from releasing a player without an injury settlement. The Packers then would have to wait six weeks after the settlement expired in order to bring him back.
If they put him on injured reserve, he would not be able to practice.
"I think I could develop just fine even if I was on IR," Lyerla said. "I think there's a lot of things I could do just from a football IQ point that would help me a lot. Obviously, I'd be able to be around and go to meetings and stuff, learning the offense and just getting better at my role."
Lyerla was injured during the team's Family Night practice at Lambeau Field. He tried to hurdle a defender after making a catch and sustained a hit to his right knee. He has been using crutches to get around the locker room and has been wearing a large brace on his right knee.
All coach Mike McCarthy would say is that team doctors believe he will be out "multiple weeks."
"I'd hope that they keep me somehow," Lyerla said. "I don't imagine coming back for training camp, so [injured reserve] is pretty much my only option."