The 29-year-old crashed late on in the first stage of the Tour de France on Saturday and was ruled out of the competition a day later.
He was found to be suffering from a dislocation of the joint between his right shoulder blade and collarbone before his team, Omega Pharma Quick-Step, confirmed he will need an operation on the problem.
The ligaments around Cavendish's acromioclavicular joint were found to be ruptured and his shoulder separated.
Surgery will take place on July 9 to stabilise the joint with the expected recovery time of six weeks likely to rule him out of the Games, which get under way on July 23.
"It's worse than I was hoping, but immediately after the crash I knew something was really wrong," Cavendish told his team's website.
"It is really painful, but at the moment all I can do is focus 100 per cent of my effort on my recovery to be able to get back racing for Omega Pharma Quick-Step as quickly as possible."