It is a cruel blow for Ferris who was beginning to come to the boil for Britain and Ireland's elite, having scored a try in the midweek hammering of the Golden Lions and picked up the man-of-the-match award for his try and all-round efforts in last Saturday's tight win over the Cheetahs.
The Maghaberry man, who turns 24 in August, was thought to be on course to don the number 6 jersey for the first Test against South Africa on Saturday week.
He sustained the tour-ending injury during Monday afternoon's training session in Durban, as the Lions prepared for Wednesday's clash with the Sharks.
Lions head coach Ian McGeechan said: "Stephen twisted his right knee in a training drill and following a medical assessment it was decided that he should undergo a scan to determine the extent of the injury.
"He had the scan this morning and unfortunately that showed he had a grade two tear to his medial collateral ligament.
"This usually requires a four-to-six week recovery period and is severe enough to mean he will miss the rest of the tour.
"Therefore with six matches left on tour after Wednesday's match against the Sharks, we believe we need to fly out a replacement as cover for the back row."
Ferris' replacement is Ospreys and Wales back rower Ryan Jones, who captained Wales to summer tour wins over Canada and the USA in the past week-and-a-half.
Commenting on Jones' call-up, McGeechan said: "Ryan is on the standby reserve list and of course has been playing for Wales over the last few weeks in Canada and the USA.
"He will fit right in as he knows a lot of the players and of course he was a Lions replacement on the 2005 tour to New Zealand.
"In fact, on that tour, he showed how competitive he is as an individual by forcing his way into the Test side for all thee matches against the All Blacks."
The 28-year-old Jones will arrive in South Africa on Thursday (June 11) and will meet up with the squad in Cape Town.