The 20-year-old picked up the injury while playing for Ghana as external in their draw with Angola during the international break.
Leicester boss, Steve Cooper, whose side host Chelsea in the top flight on Saturday said the injury is serious.
According to Cooper, Fatawu had an Anterior Cruciate Ligament, ACL, injury that is going to rule him out for the rest of the season.
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Fatawu helped the Foxes to promotion last season and has played 11 times for them in the league during the present campaign.
He inspired Leicester to a win against Southampton on 21 October when the Foxes came back from 2-0 down to win 3-2 after he came on in the second half – and had started the club’s three games since then.
Former Premier League goalkeeper, Shay Given, after Fatawu’s performance against the Saints commented that Fatawu is an absolute lightning and a brilliant player to come off the bench.
Leicester are 15th in the Premier League with 10 points from their opening 11 games.