The 22-year-old sustained a fractured vertebra in Luiz Felipe Scolari's side's quarter-final win over Colombia and as a result will miss the rest of the tournament.
Matthaus believes that the Selecao will have a tough time making up for his absence in their semi-final clash with Germany.
He told FIFA.com: "No German fan or player is happy about Neymar being injured, the spirit of fair play does not allow for that and we are here to play against the best players in the world and so it is bad that such a good player has been hurt.
"We will face the fact that Brazil still has other excellent players and although you cannot replace Neymar just like that, it will be the team's job to make up for him not being there.
Germany and Brazil face off in Belo Horizonte on Tuesday.