The Spanish winger twisted his knee in the first half of the 3-0 triumph over the Premier League leaders at Vicarage Road on Saturday following a challenge with Virgil van Dijk.
Watford provided an update on Twitter, which read: "Gerard Deulofeu is set for surgery after scans confirmed a ruptured ACL and torn meniscus suffered during the first-half of our win over Liverpool.
"Come back stronger, Geri, we're all with you!"
Hornets boss Nigel Pearson had confirmed the former Barcelona forward would play no further part in the 2019-20 campaign during an interview with Sky Sports on Sunday.
"Unfortunately for us the scan results really show he is probably going to be out for the rest of the season," Pearson said.
"The initial scan results show that he has got an ACL [rupture], which is a really bad thing for us because he has been such an important player for us."
Watford's win over Liverpool, which was the Reds' first Premier League loss of the season, lifted Pearson's men out of the bottom three on goal difference.