Injury-prone Palu made his first start for Australia in almost two years against the United States last Friday in Wellington, only to hobble from the field with a strain which could take up to six weeks to heal.
Australia, whose campaign has been rocked first by a shock loss to Ireland and then by a string of injuries in their win over the Americans, said they might not replace Palu until after their final Pool C match against Russia on Saturday.
"It's bad luck for Wycliff," Australia coach Robbie Deans said in a statement.
"Unfortunately, his previous history of injury in this area has impacted in terms of lengthening the timelines that are required for his rehabilitation."
The Tri-Nations champions will almost certainly advance to the knockout stages and there was some good news about some of their walking wounded.
Experienced lock Dan Vickerman was cleared of damage to his leg and would be available for selection for the Russia match.
Fullback Kurtley Beale, however, had suffered a "minor" hamstring injury and would be rested for this week's match, while centre Pat McCabe, who dislocated his shoulder against the US, was also only likely to be fit for the quarter-finals.
Rob Horne, who fractured his cheekbone in Wellington last Friday, would not be available to take his place in the centres until the semifinals, should the Wallabies make it that far.
A third centre, Anthony Faingaa, was "following the IRB concussion protocols" but could be available for Australia's next match after being knocked out cold late in the victory over the US.
Winger Digby Ioane, who fractured his thumb in Australia's opening victory against Italy, was on schedule for a return in the quarter-finals.
Flankers David Pocock and Scott Higginbotham, winger James O'Connor and squad captain James Horwill were all expected to be fit to face the Russians.