The winger left the Brandywell on crutches having been forced off just 10 minutes into his return.
Derry have not put a timeframe on Duffy’s return.
However, the former Celtic man appears set for a number of months on the sidelines.
Jamie McGonigle scored twice as Derry’ strong start to the season continued with a 2-0 win over Drogheda United.
However the win was overshadowed by confirmation of the severity of Duffy’s injury, which comes less than two weeks after Candystripes’ midfielder Ciaron Harkin suffered a ruptured ACL.
Duffy returned to his boyhood club from Dundalk this season having won two League of Ireland titles with the Lilywhites.
Having left Derry for Celtic in 2015, he came on in the second half of Monday’s win over Drogheda United but hobbled off 10 minutes later following a challenge from Keith Cowan.
Manager Ruaidhri Higgins said after the game his side were hoping x-rays would reveal the injury to be “bone bruising or a heavy knock”, adding that anything more severe would be a “major blow to Michael and us.”
Derry remain undefeated after five league games and face a huge match against early leaders St Pat’s Athletic at the Brandywell on Friday night.
McGonigle fired home an early opener on three minutes from inside the area.
The former Crusaders and Coleraine striker doubled his tally with a close-range finish on 64 minutes.
Ruaidhri Higgins’ side sit third in the table, one point behind St Pat’s but with a game in hand.
After early chances for Drogheda duo Dayle Rooney and Sean Roughan, both saved by Brian Maher, McGonigle opened the scoring on three minutes with a powerful finish from inside the area.
Joe Thomson and Daniel Lafferty both denied by Sam Long in the Drogheda goal, who lost key midfielder Darragh Markey just before half-time.
Darragh Nugent fired wide of the Derry goal in a rare way attack, and McGonigle missed a chance to double both his and Derry’s tally when he rolled the ball wide from Shane McEleney’s pass.
The second half was a sluggish affair and McGonigle’s second goal was a rare highlight. The forward netted his fourth of the season when he slotted home from close range on 64 minutes to double Derry’s advantage after a scrappy passage of play.
After an unbeaten start to the season and three clean sheets in a row, Higgins added the victory sets up a “big game” with leaders St Pat’s on Friday night at the Ryan McBride Brandywell Stadium (kick off 7.45 pm).
“I thought we were really good for large spells in the first half, the second half maybe not so good.
“We might have got a bit too comfortable within the game but we managed those moments well.
“It’s a good win, it’s a clean sheet and we’ve created good chances.”
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