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The highly-rated openside was forced to miss most of last season after the original surgery to repair the damage.
''The news of the extent of Neil's injury is a blow to Ulster,'' said Chief Executive Michael Reid.
''It's extremely disappointing for him personally. However, being the very dedicated player he is, and with the support of the medical staff, I am confident that he will be back, better than ever next season.''
McMillan came back during the summer and was a prime mover in helping the Ireland Sevens side qualify for the World Cup finals in Hong Kong.
The 22-year-old played for Ulster in the pre-season friendly against NEC Harlequins in August, but has been sidelined ever since.
McMillan was hoping to break into the Ireland squad for the autumn internationals after Keith Gleeson broke his leg during pre-season training.
McMillan, Johnny O'Connor of Wasps and London Irish flanker Kieron Dawson were uppermost in Ireland coach Eddie O'Sullivan's mind as a replacement ball-winning loose forward.
Now it will be a case of starting all over again for McMillan who was poised to take over the captaincy of Ulster from Andy Ward.
