The 28-year-old midfielder saw a specialist this week after being carried off on a stretcher during the club's 2-1 defeat to Annan Athletic last weekend.
Shiels has withdrawn from Northern Ireland's squad for their World Cup qualifiers against Russia and Israel, but McCoist is hopeful that he will not need surgery.
The Gers boss told Sky Sports News: "Dean went down to London on Monday and it is not great news with regards his knee.
"Hopefully it does not require an operation. Without speaking to the specialist myself, which I haven't done, I have spoken to the doctor. It would be very surprising if Dean comes back this season.
"Again rather half-full than half-empty, it looks at this stage as if no surgery will be required."
Shiels has scored 11 goals in 30 appearances for Rangers this season.