Manager Avram Grant recalled the midfielder from a loan spell at Ipswich this month, hoping he could play a part in the club's five-match relegation battle.
But he limped off 20 minutes into a reserves clash with Bolton on Tuesday with a leg injury and Sportsmail understands that the Hammers have already written off his chances of playing again this season.
Dead end: Kieron Dyer (left) looks to have played his last game for West Ham
Because Dyer has been so blighted by injury during his time at Upton Park, the 32-year-old is one of the club's most expensive failures in recent years.
Including the ?6million they paid Newcastle in 2007, plus Dyer's wages and bonuses, the injury-prone midfielder will have cost more than ?23m when his contract expires in June. Dyer has completed just three full games and never scored.
The club are unlikely to offer him a new contract but Ipswich manager Paul Jewell is keen to take Dyer back to Portman Road next season on a free transfer.
Comeback: Jack Collison (right) will soon make his first team return from injury
There was good news from team-mate Jack Collison, who played 90 minutes in the reserves' 1-0 defeat as he returns from a knee injury.
'The knee has been good,' Collison said. 'To be fair the medical team have been brilliant for me. I feel good and I'm ready and raring to go.
'Obviously it has been frustrating at times. With the team we've got we have played some really nice stuff at times and the results just don't seem to have come.'
Collison ready to help West Ham in their bid for Premier League survival Desperate Hammers boss Grant turns to Dyer in battle to avoid the dropWest Ham flop Dyer rejoins old club Ipswich in month-long loan switchAll the latest West Ham news, features and opinion
Explore more:People: Jack Collison, Kieron Dyer, Paul Jewell Places: Newcastle