Another devastating blow in a season marred by several major problems, the 21-year-old winger needs surgery after limping off at Fulham last Friday.
He will miss the rest of Wolves' Premier League campaign and not be available for selection as Portugal look to win the Euros for the second time running this summer.
On top of that as well, midfielder Ruben Neves has tested positive for Covid-19 and entered a period of self-isolation.
Wolves confirmed Neto's injury in an official statement which read: "Pedro Neto suffered a significant injury to his patella (knee cap) during the match against Fulham and, following a review with a knee specialist in London at the weekend, surgery has been planned for later this week.
"Unfortunately he is not expected to return to play until next season."
Neto is the latest in a series of Wolves players to suffer a severe injury in 2020/21, with Raul Jimenez still recovering after fracturing his skull in November while Jonny Castro Otto recently sustained his second anterior cruciate ligament rupture in less than a year.
Fernando Marcal, Willy Boly and Daniel Podence are among the long list of others who have had issues over the course of the campaign, in what has been a complete reverse to previous years where they barely had any injury worries.
Wolves boss Nuno Espirito Santo confirmed after the 1-0 victory at Craven Cottage that Neto had originally picked up a knee problem while on international duty with Portugal last month.
He had been taped up for Friday's game and left the pitch just after the half-hour mark – going on to watch the rest of the match from the stands with a bag of ice taped around his left knee.
Nuno said on Neto at the time: "He was not able to continue. He was in pain.
"It's a problem he's been struggling with since the game with Portugal. We tried to manage it but today was impossible."
Neto has been the bright spark in a challenging campaign for Wolves and earned plaudits from far and wide, with his solo strike at Southampton likely to go down as their goal of the season.
He has scored five league goals and made six assists but now joins the likes of Otto, Marcal (groin) and Neves on the sidelines.
On those three players, Wolves added: "Jonny saw a specialist for his knee ligament injury, and his surgery is also planned for later this week.
"Marcal is making very good progress following surgery to his groin, although as yet no date has been set for his return.
"Ruben Neves has tested positive for Covid-19 and is self isolating in line with government guidance."
Meanwhile, defender Boly is pushing to be available for Saturday's game against rock-bottom Sheffield United – now taking place at 8.15pm so it does not clash with the Duke of Edinburgh's funeral.
He has missed the last two games after also testing positive for coronavirus but his period of self-isolation ends tomorrow.