It is a bitter blow for both the Lions and the player, who figured in his seventh successive Test at the Suncorp Stadium.
The 2009 skipper now has the option of remaining in Australia to watch his team mates hopefully clinch a first series success since 1997, or to return home.
England lock Geoff Parling, who was a second-half replacement for Alun Wyn Jones in Brisbane, is the likely replacement for O'Connell at the Etihad Stadium this weekend.
He was due to captain the Lions in their final mid-week match against the Rebels in Melbourne tomorrow but has now been withdrawn from the side.
Ian Evans moves up from the bench to take his place in the second row alongside Richie Gray, with Tom Croft joining the matchday 23.
Wales blindside Dan Lydiate will now lead the Lions in place of Parling.
There are no plans to call up a replacement for O'Connell at this stage.