The 26-year old's contract with the south Wales side ended last month, however, he had hoped that he would be able to prove his worth to manager Kenny Jackett in pre-season and win a new contract.
Thomas has spent the best part of the last two years on the sideline, undergoing numerous surgery om the troubled area.
Swansea physio Richie Evans said: "At the moment it looks like Thommo will leave the club.
"It's not good news for him or the club. He may yet recover but it could take as long as a year and a half for his knee to settle down completely.
"Even then it may not be up to playing professionally."
Thomas is a legend in his own right in home town, famously scoring a hat-trick against Hull City on the last day of the 2002/03 season to keep them in the Football League.