The Liverpool defender felt pain during a training session on Wednesday and subsequent tests revealed the nature of his injury.
It remains unclear how long the 25-year-old will be missing for, but the news will frustrate Liverpool boss Brendan Rodgers, who lost England striker Daniel Sturridge to injury during the last international break.
Croatia coach Niko Kovac expressed his disappointment, while revealing Panathinaikos defender Gordon Schildenfeld would replace him.
"It would be nice to have Lovren with us, but the situation is as it is," said Kovac. "Schildenfeld has returned to the group."
Lovren was looking to add to his 30 international caps in the double-header in Group H.
The defender joined Liverpool during the close-season from Southampton and has been an ever-present for Rodgers' side in the Premier League.
