Ellis suffered the injury in Leicester's Guinness Premiership semi-final victory over Bristol on May 5 and is to undergo surgery later this week.
England head coach Brian Ashton said: "This is a major blow to Harry, to Leicester given that they are aiming for a treble with the Heineken Cup final and to England for the World Cup.
"Harry was a key figure for us in the RBS 6 Nations and he will be sorely missed. I wish him all the best for a full recovery."
Ellis has already missed last weekend's Premiership final victory over Gloucester and will sit out Sunday's Heineken Cup final against Wasps.
Tigers head coach Pat Howard said: "This is obviously disappointing news for Harry, Leicester Tigers and for England.
"Harry has had an excellent season and an impressive Six Nations but now he will miss the Rugby World Cup and two big finals with Leicester.
"I really feel for him and we all look forward to having him back."
There was an immediate fear for Ellis' World Cup chances when he went down against Bristol at Welford Road.
And the bad news was confirmed when medics from England and Leicester agreed surgery on his left anterior cruciate ligament was the best option for his long-term recovery.
Ellis was consistently England's best player during the Six Nations and his absence will be a major blow for Ashton.
England are already sweating over the fitness of centre Mike Tindall and number eight Dan Ward-Smith, who Ashton has described as "borderline" chances of making the World Cup.
Ellis' injury opens the door for one of Peter Richards, Shaun Perry or Andy Gomarsall to lay claim to the number nine jersey during England's two-Test tour of South Africa.