Yeo had been at risk of missing the rest of the NRL season after he left the field in Friday's loss to the Warriors, with a 10-week lay-off typically required after surgery.
But the Panthers on Monday decided to put off surgery, and take a wait-and-see approach on how Yeo recovers and if he can avoid the knife before playing again.
Penrith are yet to put a timeline on his return, but were hopeful he would be fit to play a role in the premiership favourites' title charge.
It is understood that had Yeo's injury happened earlier in the season, he would likely have gone under the knife.
The situation is believed to be similar to Jarome Luai's in 2023, when the Penrith five-eighth injured his shoulder late in the regular season but put off surgery to play finals.
Penrith have made a habit of having players play through injury to be part of premiership wins throughout their dynasty.
Almost half of their squad were walking wounded through the first title of their four-peat in 2021, which the club compared to climbing Mount Everest.
Nathan Cleary played through persistent shoulder issues in 2021 and 2024, requiring surgery afterwards.
Yeo himself avoided surgery on a shoulder injury at a similar time last year, and missed just two games before returning.
What Yeo's latest injury means for his hopes of leading Australia at the end-of-season World Cup remain unclear, depending on how he gets through the finals.
The 31-year-old could theoretically be operated on after the World Cup final and be fit for round one next year, if his body is up to playing in the tournament.
The star lock is believed to be keen to represent Australia on home soil, where the Kangaroos will look to win their fourth straight World Cup.
Had Yeo been sidelined it would have been a monumental blow to the first-placed Panthers, given the role he plays in both attack and defence at lock.
At the weekend, ex-Panther Spencer Leniu described Yeo as the "heartbeat" of Penrith's team, declaring his injury would be a "massive loss" for the club.
Penrith face Leniu's Sydney Roosters in a blockbuster top-of-the-table clash on Thursday night, which Yeo would not be expected to play in.
Star centre Casey McLean could return from a broken hand in coming weeks for Penrith, while hooker Mitch Kenny (broken leg) is expected to be back for finals.
Fullback Dylan Edwards has also been a week-by-week proposition, after missing three games through a shoulder injury.
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