The Bills were holding out hope that Parrish could return at some point this season but tests revealed on Tuesday that Parrish would not be able to return.
Buffalo placed Parrish on injured reserve Tuesday and promoted receiver Naaman Roosevelt from their practice squad.
The move made Tuesday further depletes the Bills' depth at receiver, coming a week after Marcus Easley was placed on I.R. due to an illness.
Parrish was carted off from the sideline after getting hurt in the second quarter while blocking on teammate Steve Johnson's 19-yard catch. He lay on the Bills sideline for several minutes, where he was treated by team trainers, before being carted to the locker room.
Parrish's injury is a blow to a Ryan Fitzpatrick-led offense that has been prolific in scoring a combined 79 points in two games, including a 41-7 season-opening win at Kansas City. A seven-year veteran, Parrish became the Bills longest-tenured receiver after the team traded Lee Evans to Baltimore last month.
Noted for his dynamic speed, Parrish was being counted on to play in the slot, where he showed signs of flourishing last season. He had a career-best 400 yards receiving and two touchdowns in eight games before sustaining a season-ending broken wrist.
Second-year player David Nelson is expected to take over in the slot after filling in for Parrish on Sunday. Nelson scored the decisive touchdown on a 6-year catch against Oakland with 14 seconds left, capping a 35-point second half eruption in which Buffalo overcame a 21-3 deficit.
Roosevelt is familiar with the Bills offense. An undrafted rookie out of University at Buffalo, Roosevelt had nine catches for 139 yards in six games with the Bills last season after being promoted off the practice squad.
He was among the team's final cuts prior to the start of this season.
The Bills also announced signing rookie offensive guard Keith Williams to their practice squad. Listed at 6-foot-5 and 310 pounds, the Nebraska product was drafted in the sixth round by Pittsburgh in April before being released by the Steelers earlier this month.
Williams will provide Buffalo insurance at guard with starter Kraig Urbik expected to miss between two and four weeks with a knee injury.
The Bills also reached a settlement with rookie linebacker Robert Eddins, and released him from injured reserve.
The 29-year-old Parrish has one reception for 16 yards this season.
James Walker covers the AFC East for ESPN.com. Information from The Associated Press was used in this report.