Kidd-Gilchrist suffered a torn labrum in his surgically repaired right shoulder Feb. 10 and was re-evaluated after the All-Star break.
The diagnosis was revealed by an MRI exam that was scheduled after Kidd-Gilchrist left in the third quarter of the game against the Pacers with what the team called a dislocated shoulder.
Yahoo! Sports was first to report that Kidd-Gilchrist would miss the rest of the season.
He has been limited to seven games this season since having surgery on the shoulder. He was averaging 12.7 points, 6.4 rebounds and 1.3 assists.
The 6-foot-7 Kidd-Gilchrist had surgery for a torn labrum in his right shoulder on Oct. 6, months after he agreed to a $55 million contract extension. He was injured in the team's first preseason game at Orlando on Oct. 3 when he landed awkwardly on the shoulder.
The Associated Press contributed to this report.