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|*Will miss remainder of season|
Martin has five years and more than $66 million left on his contract. He played in two games this season, averaging 9.5 points and 10 rebounds.
The Nuggets lost 108-99 at Orlando on Wednesday night.
"I just found out," Nuggets player personnel director Mark Warkentien told The Associated Press from Belgrade, Serbia, where he was wrapping up a scouting trip. "I'm still taken aback a little bit and I'll talk to my guys in the morning and assess where we're at."
Martin was limited to a career-low 56 games last season after surgery on his left knee. He was suspended in the playoffs for his tirade at the coaching staff after his playing time was held down against the Los Angeles Clippers.
He was taped up and ready to play against the New York Knicks on Nov. 8 when a team doctor went into the locker room minutes before tip-off and sent him for tests on his swollen right knee.
"Right now I'm at a loss for words, you know what I'm saying? I worked my butt off in training camp. For this to happen now, I'm down in the dumps," Martin told the AP that night after an MRI revealed another surgery was necessary.
Martin said he had no idea how or when he hurt his right knee but was hoping to miss only one or two months, not the whole year.
"It's incredibly despondent for the team, and for the way Kenyon was performing and reacting to the circumstance of last year," Karl said. "And now to be hammered with the reality that he's not going to be able to play this year. I feel for him. I feel for his career."
The Nuggets bolstered their front court in the offseason with the addition of Joe Smith and Reggie Evans, to go along with the return of Nene.
Star forward Carmelo Anthony said the Nuggets would miss Martin inside.
"I don't care what nobody says, he's a big part of our team," Anthony said.