The English defender, 23, was replaced by Stephan Lichtsteiner after 36 minutes of the clash against Manchester United.
Holding clutched his left leg as he fell to the ground after a collision with Marcus Rashford.
Medics checked him over on the side of the pitch before the decision was made for Unai Emery to replace him.
A crowd of Manchester United supporters sitting close to the touchline gave the 23-year-old a round of applause as he left the pitch.
Holding made an encouraging start to the clash, but the score was locked at 1-1 when he was hauled off.
Shkodran Mustafi opened the scoring after 26 minutes before Anthony Martial levelled the scoring four minutes later.
Speaking on BBC Radio 5 live, ex-Leicester City star Robbie Savage predicted that Holding suffered ligament damage.
He said: "It looks like knee ligament damage and the medical team were possibly doing tests on the side of the field.
"He stood up and was in a lot of pain. It is a shame because he has been playing well."
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