Medical imaging on Friday revealed the extent of the damage Davis sustained in the Mavs' NBA loss to the Jazz in Utah on Thursday.
If the 10-time All-Star opts not to have surgery, he is expected to miss at least six weeks, while recovery from surgery could take months.
Davis, 32, has been considered a top trade target with the league's trade deadline coming up on February 5th.
He arrived in Dallas last season in the shocking blockbuster deal that sent Luka Doncic to the Los Angeles Lakers.
The oft-injured Davis has played in just 29 regular-season games and two play-in games for Dallas, where he arrived still recovering from an abdominal injury.
He then missed six weeks with an adductor strain, and this season he has missed time with a calf strain and a groin injury.