Peake was the second-leading receiver for Clemson (2-0) with eight catches for 84 yards and a touchdown.
Tigers coach Dabo Swinney said Peake tore an ACL during a non-contact drill Tuesday and an MRI on Wednesday showed the ligament tear. Football spokesman Tim Bourret said that Peake will require surgery. Bourret said Clemson will apply for a medical redshirt so Peake won't lose a year of eligibility.
"This is a big loss. Charone was having a great year and was going to have a great year," Swinney said.
Bourret said Clemson, which is off this weekend, would not specify which knee Peake hurt, per athletic department policy. Clemson returns to action Sept. 19 with a Thursday night game at North Carolina State to open Atlantic Coast Conference play.
Peake, a junior from Moore, was expected to be a large part of any success Clemson was to have this year. He caught 25 passes for 172 yards and two touchdowns in limited action last season. Still, the 6-foot-3, 200-pound junior was on the preseason watch list for the Biletnikoff Award that goes to the top receiver in college football.
Peake had five catches for 58 yards in the Tigers' 38-35 opening victory over then-No. 5 Georgia. Peake's 25-yard grab to the Georgia 7 in the first quarter set up Clemson's first touchdown.
Peake struck for his only touchdown of the season last week in a 52-13 win against South Carolina State, a three-yard catch from backup quarterback Cole Stoudt.
While Clemson had 14 players catch at least one pass against South Carolina State, Peake's loss is a hit for the Tigers in an area where they're not terribly deep.
"We are thin at receiver with just six scholarship players now. We like to carry 10 at that position," Swinney said. "We have good players, but we don't have a lot of bodies."
Peake's signing with Clemson was considered just as significant as locking up receiver Sammy Watkins in February 2011. But while Watkins became an All-American as a freshman, Peake struggled to find playing time in Clemson's fast-paced system his first two years.
Swinney and offensive coordinator Chad Morris had said during preseason camp that Peake had taken some big steps forward and was poised to become a major part of the Tigers' offense.
Instead, Peake will have several months of rehabilitation before seeing the field again.
Swinney said junior Adam Humphries, Peake's teammate at Dorman High School, would move into Peake's starting spot. Humphries has started five of 29 games in his career. He's had seven catches for 53 yards in two games this fall.
Swinney said younger players like redshirt freshman Germone Hopper, and true freshmen T.J. Greene and Mike Williams will have to step up in Peake's absence. Hopper had two touchdown catches last week in the win over South Carolina State.