The Ospreys tighthead was carried off in the third minute and will now require surgery.
Exeter-born Jarvis, who made his Test debut against Argentina earlier this month, has been ruled of Wales' RBS 6 Nations title defence, which begins in February.
Ospreys physiotherapist Chris Towers Wednesday confirmed the extent of Jarvis' injury, describing it as "significant".
Wales' autumn campaign, in addition to producing successive losses to Argentina, Samoa and New Zealand, has been riddled by injury setbacks.
Jarvis now joins his Ospreys and Wales colleagues Adam Jones, Alun-Wyn Jones and Richard Hibbard on the sidelines, while Newport Gwent Dragons flanker Dan Lydiate is also a long-term absentee.
Wales face Australia in their autumn finale on Saturday, with head coach Warren Gatland having delayed his team announcement by 48 hours while injuries are assessed.
Wing George North, centre Jamie Roberts, lock Ian Evans and flanker Ryan Jones are among those whose fitness Gatland is sweating on prior to the team being confirmed Thursday lunchtime.
Towers said: "Aaron suffered a significant ligament injury to his right knee in the Wales versus New Zealand game.
"He is going to require surgery and will miss the remainder of the 2012-13 season.
"We are currently in discussions with specialists to establish the best surgical option and timing of the surgery to ensure the best outcome."
Jarvis, who played for Bath before joining the Ospreys, made an impressive start to his international career, filling the void left by Adam Jones' knee injury that is likely to rule him out until after Christmas.
Cardiff Blues forward Scott Andrews, who took over from Jarvis against the All Blacks, is his probable replacement, with 20-year-old uncapped Scarlets prop Samson Lee likely to be among the substitutes.
Ospreys chief operations officer Andrew Hore, meanwhile, has been left to reflect on a crippling injury crisis at the Swansea-based region.
"We have now lost three senior tightheads in the space of just a month," Hore said.
"It is particularly bad news for us, coming at a time when our resources have already been badly-hit through injury and just before our biggest games of the season so far - the back-to-back Heineken Cup matches against Toulouse.
"The current season structure sees games in the top European competition go straight into a month of Test rugby, and then back into Europe and the Welsh derbies, for a crucial month-long period in December and January.
"Looking at the players we have lost through injury in recent weeks it's clear that the structure isn't working, for the (Welsh) national body or the regional partners, and it needs to be looked at globally.
"If ever there was a time which perfectly highlights the need for a structured, global season which protects our biggest assets - the players - and increases the value of domestic rugby by ensuring showpiece matches are played with the strongest squad available, then this is it."