Manager Neil Lennon admitted Kayal could face a lengthy spell out on Friday and the news was confirmed by the surgeon.
A statement on Celtic's official website on Tuesday read: "Beram Kayal underwent surgery last night on his injured ankle and the club can confirm that, unfortunately, our worst fears have been realised and Beram will be out of action for at least four months."
Celtic initially thought the Israel international would be out for a few weeks after he was injured in a challenge with Rangers midfielder Lee McCulloch during their Old Firm win on December 28.
But further scans showed the need for surgery to repair cartilage and ligament damage and Celtic's medical staff will now concentrate their efforts on making sure Kayal is fit for pre-season.
Lennon said today: "This is very sad news for Beram. He has been brilliant for us and instrumental in our performances during the season.
"He will definitely be a big loss for us, but more importantly we are disappointed for him to be missing such a large part of the season at a time when he was playing so well.
"Clearly his health and fitness is now our priority and we will be making sure he gets our total support during the coming period."
Kayal has been one of the most impressive performers in the Celtic team under Lennon after signing from Maccabi Haifa in the summer of 2010.
But Lennon confirmed he would not seek a replacement in the transfer window with the likes of Victor Wanyama, Scott Brown, Ki Sung-yueng and Joe Ledley competing for a place in central midfield.
The 23-year-old has previously undergone hernia surgery and suffered a broken wrist, missing last season's Scottish Cup final win over Motherwell, and broken nose during his time at Celtic.
There was better news on the injury front for Lennon today with Ledley and Gary Hooper both declared fit for the Clydesdale Bank Premier League clash with Dundee United on Saturday.
Ledley has recovered from a cut above the eye that he suffered in Sunday's 3-0 William Hill Scottish Cup win over Peterhead, which Hooper missed with a groin strain.
Glenn Loovens and Kris Commons are also available for the visit of United after injury.
Mo Bangura faces a further week on the sidelines with a knee injury, while Mark Wilson will return to training on Friday after recovering from knee surgery, although he is several weeks off a first-team comeback.
Daniel Majstorovic is scheduled to return to training on Monday after fracturing his cheekbone against St Johnstone last month.