But Houller stated: "Nigel is not as bad as we thought. He could be back in training in two to three weeks.
"We thought it was a tear but it is just slight damage to the medial ligament. That is good news."
Houllier revealed that Villa are currently in contract talks with Reo-Coker, whose deal expires in the summer.
The player is reported to want an increase from £30,000 to £50,000-a-week to remain at Villa Park and the former Liverpool boss is keen to retain his services.
"Am I confident a compromise can be reached? Yes, between the two figures mentioned. That's a compromise," Houllier said.
"I want to keep Nigel and they [Reo-Coker and his representatives] know that. He was my captain."
Villa, who are 14th in the Premier League, face Blackpool at home on Wednesday before entertaining Manchester United three days later.
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