Mahomes went down in the fourth quarter and was helped to the locker room, unable to put any weight on his knee. He'll now miss the remainder of the season as the Chiefs have three games left.
The two-time MVP was knocked out of the game with 1:53 remaining.
After Mahomes was helped to the locker room, backup Gardner Minshew threw a final interception to seal Kansas City's fate.
The Chiefs, who last failed to reach the playoffs in 2014, fell to 6-8 with the home defeat, marking their third consecutive loss and fifth in their last six games.
Together with victories by the Buffalo Bills, Houston Texans, and Jacksonville Jaguars, the Chiefs were ensured of missing out on the playoffs after an epic run.
"The guys are down," Chiefs coach Andy Reid said.
"They busted their butt to win the game, and I wouldn't expect anything less. So, you know, it's not a great feeling."
The Chiefs have played in five of the past six Super Bowls, winning the 2020, 2023, and 2024 editions of the championship spectacle while losing in 2021 to Tampa Bay and earlier this year to Philadelphia.
"All in all, we came up short on both sides of the ball and special teams," Reid said.
"We had a few mistakes, and that ends up costing you against a good football team. I appreciate the effort of the guys and stepping up, playing hard and aggressive."
Reid noted the Chiefs have been battling injuries all season.
"Some positions were backup guys to backup guys, and they battled their tail off, so that's appreciated," Reid said.
"With that, we've got to do better, you know, get opportunities in the red zone. For field position, you have got to take advantage of that."