Petaia, who became his country's youngest player at a World Cup in Japan last year, broke down in Buenos Aires on Wednesday as the Reds prepared to meet last year's runnersup, the Jaguares, on Saturday.
The full extent of the injury will not be clear for a few days but the 19-year-old's departure from the playing group to head home for scans suggests the initial prognosis is not positive.
"We’re gutted for Jordan," Reds coach Brad Thorn said in a team release.
"He’ll return home with the squad and will be looked at for further diagnosis. It’s personally frustrating for him and also for us as a group on the field."
Petaia's injury is a blow for the Reds, who are winless after two defeats on the road to the ACT Brumbies and the Johannesburg-based Lions.
It also comes nearly a year to the day that the strapping teenager suffered a season-ending foot injury during the Reds' second match against the champion Crusaders in 2019.
Petaia recovered to earn a spot in Michael Cheika's World Cup squad and shone on his test debut on the wing against Uruguay, scoring a try and setting up another.
He also featured against Georgia and started at outside centre against England in the quarter-finals.
Rugby Australia will also be sweating on Petaia's fitness, with the governing body in desperate need of good news stories as it tries to strike a long-term broadcasting deal for Super Rugby and the Wallabies' test matches.
Following the Wallabies' quarter-final exit from Japan, the nation's equal worst World Cup result, three out of four of the country's Super Rugby teams are winless after the opening two rounds and crowds have been poor.
(Reporting by Ian Ransom; Editing by Peter Rutherford)