The Celtics announced Saturday that Thomas suffered a "re-aggravation of a right femoral-acetabular impingement with labral tear" during Game 2 of the Eastern Conference finals.
Thomas initially injured the hip March 15 against Minnesota and missed the following two games. He aggravated the injury in Game 6 of the Eastern Conference semifinals against the Washington Wizards last week.
He sat out the second half of Game 2 vs. Cleveland because of what the team called a hip strain. He missed all six of his field goal attempts and scored just two points in 18 minutes of a 130-86 blowout loss.
"I'm hurting," Thomas said in a text to ESPN's Mark Schwarz. "I gave it everything I had. I'm suppose to be out there competing with my guys and I can't. That's the most frustrating part."
"Isaiah has worked tirelessly to manage this injury since it first occurred," Celtics team physician Dr. Brian McKeon said in a statement. "The swelling increased during the first two games against Cleveland, and in order to avoid more significant long-term damage to his hip, we could no longer allow him to continue."
The Celtics said Thomas did not accompany the team to Cleveland in advance of Sunday's Game 3. He is evaluating treatment options.
The Cavaliers lead the best-of-seven series 2-0.
Celtics team president Danny Ainge, in a text message to ESPN's Jeff Goodman, said Thomas wouldn't have been able to play even if the Cleveland series were competitive. Ainge said the team likely will know next week whether Thomas will need surgery.
Thomas didn't look himself against the Cavaliers. He shot just 28 percent through six quarters (7-of-25) and was a minus-52. The veteran point guard didn't have the usual burst going at the basket and struggled to finish near the rim. He missed 7 of 10 attempts near the basket.
Before the Celtics ruled Thomas out for the season, teammate Avery Bradley said Friday night it's hard to lose Boston's top offensive weapon.
"It's a blow," he said. "Isaiah brings a lot to this team, not just with his leadership but his play. Most important, I just hope he's better. I care about him off the floor. I just hope he's OK."
Gerald Green hinted it would have to be something major to keep Thomas off the court.
"I think, for IT not to play, he'd have to have one of his legs cut off or something," Green said. "Or it's got to be something real serious."
Thomas earned All-NBA second-team honors this week after averaging 28.9 points and 5.9 assists over 33.8 minutes per game during the regular season. His play led the Celtics to the best record in the Eastern Conference.
On the eve of Boston's playoff opener in April, Thomas' sister died in a single-car accident in Washington. Thomas played through his grief and helped the Celtics overcome a 2-0 deficit to beat the Chicago Bulls in six games.
In Game 1 of a second-round series against the Wizards, Thomas lost a tooth and suffered additional dental damage while trying to defend Otto Porter Jr. Thomas underwent six hours of oral surgery during Boston's off day, then scored 53 points in an overtime victory in Game 2 on what would have been his sister's 23rd birthday.
Celtics coach Brad Stevens hinted after Boston's Game 6 win over the Wizards that Thomas was battling injuries. Thomas, though, said there were no excuses in the playoffs.
Ainge praised Thomas in a tweet Saturday, saying that the star guard had a "legendary season."