Escalona, 27, appeared in 49 games for the Astros last year and went 2-1 with a 2.93 ERA as the team's left-handed specialist out of the bullpen.
"Obviously, Sergio is an effective left-handed pitcher and we're going to have to find someone to replace him," Astros general manager Jeff Luhnow said. "It's definitely a setback."
Escalona injured his elbow swinging a bat early in the spring and pitched in just two Grapefruit League games because of discomfort. An MRI taken on Escalona's elbow Friday at Florida Hospital revealed the tear of his ulnar collateral ligament.
Escalona was acquired by the Astros in a trade with the Phillies on Jan. 10, 2011, and was a valuable bullpen piece.
"I thought this was going to be my year in the big leagues," Escalona said. "You have to learn to handle things this. I'm OK with that. What can I say?"
The Astros have left-handers Wesley Wright and Fernando Abad still in camp, as well as veteran Zach Duke, who's competing for a spot in the bullpen and in the rotation.
"This probably makes us think about Duke's role if he doesn't win a spot in the rotation," Luhnow said. "[Xavier] Cedeno pitched well, even though he was reassigned [Friday]. He's pitched well and he's shown he's got some future as a lefty out of the bullpen. There are some options and we're not panicking. We'd prefer to have a healthy Sergio on the team, but it's not to be and we're going to move onto Plan B."