The move confirms NFL Network insider Jason La Canfora's Wednesday report that the team was preparing to place the 23-year-old tight end on the IR as early as last week.
McCarthy said Monday having Finley sit out the remainder of the season is in the player's best interest.
The Packers will have a tough time replacing Finley, who was expected to have a breakout season in 2010. He had 21 catches for 301 yards with one touchdown and was in many respects becoming the focal point of Green Bay's passing game.
The Associated Press contributed to this report.