Schrader, who was second at the 2013 world championships in Moscow but also missed the 2012 London Olympics due to injury, suffered the latest setback during pole-vault training on Friday.
"Rio is done for me," the 28-year-old told reporters. "For the next year I will not be able to think about sport.
"Tendons and ligaments were torn. Anything that could get damaged in the knee was damaged."
American Ashton Eaton is the ruling world and Olympic champion with the Rio summer Olympics, the first on the South American continent, to take place between Aug. 5-21.
(Reporting by Karolos Grohmann; editing by Sudipto Ganguly)
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