Adams has not played a regular-season game for the Grizzlies since suffering the injury in January, and Memphis said Sunday that "non-operative rehabilitation did not resolve ongoing knee instability."
The Grizzlies said they expected Adams to make a full recovery for the 2024-25 season.
Adams had played in two preseason games for the Grizzlies, scoring nine points and grabbing 10 rebounds in 27 total minutes.
The Grizzlies already are short-handed without guard Ja Morant -- serving a 25-game suspension for flashing a handgun on social media for the second time in three months -- and power forward Brandon Clarke (Achilles tendon).
Adams was originally expected to miss three to five weeks when he was first injured diving for a loose ball during a game against the Phoenix Suns. But that absence extended into the rest of the 2022-23 season.
The 30-year-old is under contract through 2024-25 after reaching a two-year, $25.2 million extension during training camp last year. He has averaged 7.5 points and 10.6 rebounds per game since joining the Grizzlies in the 2021 offseason.
Reuters and The Associated Press contributed to this report.