The former Borussia Dortmund midfielder limped off in tears just before half-time after sustaining what now appears to be a serious injury.
The Germany international spent the summer recovering from a dislocated knee suffered while playing for Dortmund and this latest set-back will be a crushing blow to the 26-year-old.
Pep Guardiola confirmed the bad news at his post-match press conference with the City boss saying: “I’m so sad for Ilkay as it looks like we’ll be without him for a long time - we will know more tomorrow but it doesn’t look good.
“We’ll know the extent of the injury when he has been properly assessed by the doctor tomorrow so until then we cannot know for sure, but I think he may be out for some time.
“He is very sad, of course, as we all are.”
The loss of Gundogan ahead of Sunday’s clash with Arsenal is a major blow for the Blues, who are already without the suspended Fernandinho and Sergio Aguero.
Guardiola may turn to Yaya Toure to fill the void after the Ivorian’s impressive display against Watford.
“Yaya is an exceptional player and if he plays as he did today we are very happy for him - he can play as a defensive midfielder or further forward and he did very well this evening,” said Guardiola.
“We are happy with the result, it was important to win this game against a well-organised Watford side
“All the team worked hard and it is good to get a clean sheet and all our defenders did well against Watford’s tough, powerful strikers.”
In response to questions about John Stones and Kelechi Iheanacho’s absence from the starting XI, the Blues’ boss added: “I decided on the central defenders yesterday and Kelechi had a little problem yesterday so he started on the bench, nothing more.”
