ESPN's Adam Schefter first reported that Nelson had a torn ACL. Nelson suffered the injury in the fourth quarter of Sunday's 48-28 loss to the New York Jets.
The loss of Nelson is a major blow to Buffalo's already struggling passing game. Nelson, a third-year pro, is one of QB Ryan Fitzpatrick's favorite targets and had established quite the rapport with the QB over the past two years.
Nelson had 61 receptions for 648 yards and five touchdowns in 2011.
Gailey said the Bills have not yet determined who will replace Nelson in the slot, but No. 2 WR Donald Jones would appear to be the top candidate. Jones spent much of the spring working out of the slot. Third-round pick T.J. Graham, who was inactive in Week 1, will likely have a greater presence on the outside moving forward.