The Rockets have won 12 straight games but have now lost Yao Ming for the remainder of the 2007-08 season.
Yao has a stress fracture in his left foot and will need surgery.
GM Darryl Morey announced the decision on Tuesday.
With a FIC of 903, Yao has been the NBA's 12th most productive player this season of 17.7 per 40 minutes. He had a Reina Value of +19%.