The 24-year-old suffered the injury in Arsenal's FA Cup third-round victory over rivals Tottenham on Saturday.
Although Walcott appeared in good spirits as he was taken from the field on a stretcher, signalling the 2-0 scoreline to Tottenham fans, he is now facing surgery and a lengthy lay-off.
A statement from Arsenal read: "After coming off injured in Saturday's 2-0 win against Tottenham Hotspur, the Club regrettably announces that Theo Walcott has sustained a ruptured anterior cruciate ligament of his left knee.
"Theo will have surgery in London in the near future and is expected to be out for at least six months, therefore missing the remainder of the season and the World Cup in Brazil in the summer.
"Everyone at Arsenal wishes Theo a speedy recovery and we look forward to seeing him back on a football pitch as soon as possible."
The Football Association confirmed earlier on Monday that Walcott would face no action for his gesture towards Tottenham's supporters.
Prior to his injury setback, Walcott would have been strongly fancied to gain a place in Roy Hodgson's England squad for the tournament in Brazil.
Despite making his international debut in May 2006 and earning 36 caps to date, the former Southampton man has yet to feature at a World Cup.
He was selected in Sven-Goran Eriksson's 23-man group for the 2006 showpiece, but did not make it onto the field, before being controversially omitted by Fabio Capello in 2010.
As well as representing a blow to England, Walcott's injury comes as a major blow to the Premier League title hopes of Arsenal, who are currently one point clear at the top of the table.
Arsenal manager Arsene Wenger has already conceded he is light on attacking options and will now have to cope without a player who had contributed five goals in his last five league starts.
Walcott enjoyed his most prolific season to date in 2012-13, finishing as Arsenal’s top scorer with 21 goals in all competitions.
