The 29-year-old tore multiple ankle ligaments in training earlier in the week and could spend up to eight weeks out with the issue, which could mean he misses the start of the Premier League season which begins on August 13.
The Tottenham Hotspur defender had regularly filled in at left-back, playing in all four of Belgium's fixtures in France, but was in the frame to move to his favoured centre-back role alongside club teammate Toby Alderweireld against Chris Coleman's Wales.
That is because the Red Devils already have centre-back Thomas Vermaelen unavailable through suspension for Friday, after he picked up a second yellow card of the competition in their 4-0 thrashing of Hungary in the last 16.
National team boss Marc Wilmots has had little luck with defensive injuries. He came into the tournament without captain Vincent Kompany and fellow defenders Nicolas Lombaerts, Bjorn Engels and Dedryck Boyata because of injuries, and Vertonghen's absence leaves him with even more selection headaches.
Jordan Lukaku, brother of striker Romelu, could come in at left-back in Lille - with 21-year-old Jason Denayer now the likely favourite to replace Vermaelen. That would leave Thomas Meunier at right-back and Alderweireld alongside Denayer.
Lukaku, who plays for Belgian Pro League side KV Oostende, has made just five appearances for the national team so far - while Denayer has just seven caps to his name, making their challenge of keeping quiet Wales frontman Gareth Bale even harder.
Vertonghen's injury "a sporting tragedy" says Wilmots
Wilmots, speaking about Vertonghen's injury in a press conference on Thursday, explained that it "happened all alone" in "the last minute of training."
The 49-year-old added that he was "about to whistle for the end of training" when Vertonghen "received a ball" in front of him and then "fell to the ground clutching his left ankle."
Wilmots, aiming to take Belgium to the semis of a major tournament for the first time since the 1986 World Cup, explained that the player "had a scan" which revealed he has "torn two of his three external ligaments in his ankle."
The manager refused to talk about it being a tragedy, saying that there "are far more tragic things in life", but called it "a sporting tragedy" as he labelled Vertoghen as "a very important player" for the team.
He continued: "Mentally and physically, he was completely fit and he had a lot of desire but unfortunately on a specific movement he has done over 10,000 times, he turned his ankle."
Wilmots insisted that Vertonghen's expected recovery will take "six to eight weeks" but, choosing to remain optimistic, said that he still has "a few alternatives to replace Jan" and that he will "think it through" before coming up with a decision on the morning of the game.
The Spurs centre-half himself took to Twitter to say: "Gutted to say that my Euros is over. Good luck to my teammates for the rest of the competition."
Vertonghen is the most-capped player of Belgium's Euro 2016 contingent with 83 appearances and has clearly been shown to be one of the squad's key players on the pitch.
His loss, at such a key time in the tournament, poses a serious risk to Belgium's chances of a maiden success in France - but
Hazard available to start after overcoming thigh issue
Despite the setback of Vertonghen's absence, Belgium will have captain Eden Hazard available. He sat out training on Tuesady and Wednesday as a precaution due to a thigh problem.
That followed a sublime individual performance against Hungary, where he provided a goal and an assist and was the focal point of his nation's attack, but he since returned to training on Thursday at the club's camp in Bordeaux.
Hazard, who had his thigh tiped upon his returning to training, told reporters that his injury is "okay" and said he "didn't feel much pain" in the practice session, adding: "The game is tomorrow so I can still have treatment."
The Belgium squad travel to Lille, which is just 100 kilometres from the Belgian border, on Friday - and Hazard will be among Wilmots' squad travelling to Stade Pierre-Mauroy after overcoming his quadriceps injury.