The Yorkshire batsman went under the knife on Monday still clinging to the hope that he could be fit in time to lead England on the tour, which begins in November.
But according to the BBC, the surgery revealed more extensive damage to the joint than expected -- a development which will intensify fears that Vaughan's career could effectively be over.
However, after an ECB spokesman confirmed that Vaughan would miss the Ashes tour, David Graveney, England's chairman of selectors, told BBC Radio Five: "There is no suggestion that Michael Vaughan's career is under threat."
Vaughan has not played for England since being forced to return home early from the tour of India in March.
He attempted a comeback for Yorkshire last month but the injury flared up again and he was advised that further surgery was necessary.
Vaughan last year skippered England to their first series victory over Australia in nearly two decades and had been desperate to lead the side's bid to retain the Ashes.
The ECB said a formal statement on Vaughan's condition was due to be released at 1pm local time (1200GMT).
The news that their 31-year-old captain is to miss the Ashes, which start in November, will come as a huge blow to England whose Test series triumph over Australia under Vaughan's captaincy last year was their first since 1986/87.
Vaughan's knee injury flared up again during Yorkshire's County Championship match away to Sussex at Arundel last month, where he was unable to field for much of the game.
That led him to see a new specialist where it was decided he needed an operation to repair damage to the articular cartilage in his right knee.
Andrew Strauss is set to lead an injury-hit England side in next week's first Test against Pakistan at Lord's although England hope star all-rounder Andrew Flintoff will take over when he returns from an ankle problem.
As well as Vaughan and Flintoff, England are currently without fellow Ashes-winners Ashley Giles (hip) and Simon Jones (knee) as well as back-up fast bowler James Anderson (back).
Following the news that Vaughan had been ruled out of the Ashes, leading British bookmaakers William Hill lengthened the price of England winning the series from 3/1 to 4/1.
Australia were shortened from 8/11 to 1/3 with a drawn series now offered at 5/1.
Hills make Flintoff their 1/8 favourite to captain England in Vaughan's absence and offer 9/2 for Andrew Strauss and 16/1 for Marcus Trescothick to captain the side for the first Test in Brisbane.
Australia are the 1/2 favourites to win the 1st Test and 8/1 to white-wash England and win the Ashes 5-0.
"You cannot underestimate how important Michael Vaughan's contribution was with both the bat and as an inspired captain," said Rupert Adams, a Hills spokesman.
"Without him you have to say that Australia are now the red hot favourites to win back the Ashes at the first time of asking and it will take some heroic performances for England to return with the Ashes in their luggage."