The Leicester forward has withdrawn from his place on the bench for the clash against Wellington, when he will be replaced by his England colleague Richard Hill.
The Lions confirmed Moody had suffered an injury to his left knee in training, but the apparent seriousness was not revealed until coach Gareth Jenkins spoke to the media in Wellington.
Jenkins revealed that Moody is "out of the selection process" for next Saturday's game against Otago in Dunedin, and that will hamper his Test prospects.
Moody has not travelled to Wellington, remaining behind at the squad's Christchurch base for further tests.
Three players - Lawrence Dallaglio, Malcolm O'Kelly and Simon Taylor - have already been ruled out of the tour because of injuries.
Prop Andrew Sheridan, meanwhile, is battling to overcome an ankle injury sustained against the New Zealand Maori last Saturday, raising doubts about his prospects of being fit to face Otago.
Like Moody, Sheridan is a strong candidate for the Lions' Test 22.