"The injury is likely to require ongoing assessments and a likely 6-8 week period of rest and rehabilitation," the England and Wales Cricket Board (ECB) said in a statement, two days before the start of the series-deciding game.
The ECB said the 32-year-old suffered pain in his right knee while fielding earlier this month in preparation for a warm-up game in New Zealand, before the Test series began.
"This has failed to resolve satisfactorily," it said.
Recent scans confirmed bone bruising and possible cartilage damage to the kneecap, and Pietersen would return to Britain "for further investigations and specialist review".
He had been withdrawn from all cricket including the Indian Premier League, it said.
New Zealand will eye a rare series win and England will try to cement their position as the number-two Test nation in the third and final Test starting Friday in Auckland, following rain-affected draws in the first two games.
Pietersen made 0 and 12 in the first Test at Dunedin but came back with 73 in Wellington.
The estimated recovery period makes him a doubtful starter for the return series in England against New Zealand beginning on May 16.
England will be hoping that Pietersen, who in 2009 was forced out of the Ashes with an Achilles injury, will be fit in time for this summer's Champions Trophy and Ashes series.
Pietersen returned to the England fold last October.
The Surrey batsman was cast into international exile last August after sending text messages to touring South African players that contained criticism of then-England captain Andrew Strauss during the Test series.
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