The gold medal hopes of Australia's women's basketball team have suffered a huge setback with star forward Penny Taylor ruled out of the London Olympics.

Taylor has seriously injured her knee playing for her Turkish club Fenerbahce in the EuroLeague.

Scans have shown she has torn her anterior cruciate ligament and will have to undergo surgery.

Basketball Australia confirmed on Wednesday morning she won't be part of the Opals team for London.

The 30-year-old has been part of every major Australian women's basketball success for the past decade, including their 2006 world championship win and Olympic silver medals in Athens and Beijing.

Taylor is understandably devastated at missing what would have been her third Olympic Games campaign. 

“I am obviously extremely disappointed at not being available to play with the Opals in London,” Taylor said from her home in Melbourne. 

“Playing for Australia has always been my highest priority and missing this Olympics is devastating.”

The Victorian would have been a certain selection in the Opals' final 12 for London, which would have been her third Olympic Games.

Taylor's injury will also rule her out of the Mercury's upcoming WNBA season starting next month.

She has been in superb club form, recently being named European player of the year for 2011 by respected web site Eurobasket.com after averaging more than 19 points a game for Fenerbahce.

Basketball Australia Chief Executive Officer Larry Sengstock said that the loss of Taylor was a tragedy for the athlete and a blow for the Opals.

“We are devastated for Penny, as we know how desperately she wanted to represent her country in London,” said Sengstock.

“You simply cannot replace a player of her calibre and her loss is definitely a huge blow. Unfortunately injuries are a part of sport and we are fortunate that Australia has deep reserves of talent from which to draw. The loss of Penny, while tragic, creates an opportunity for another player to grab a ticket to London and will only make the competition at upcoming Opals training camps even more fierce.”

AAP and Basketball Australia