Bailey suffered the injury against the Oakland Raiders in Week 1.
The 33-year-old Bailey did not play last Sunday in a 24-22 win against Cincinnati. The 10-time Pro Bowl selection had five tackles against the Raiders in a 23-20 loss.
Defensive end Elvis Dumervil (shoulder) did not practice on Friday and is also ruled out for Sunday.
"I wouldn't call it a setback," Broncos coach John Fox said. "This is a physical game. It's hard enough with two arms and it's hard to play with one arm."
In addition, wide receiver Brandon Lloyd (groin) was a full participant in practice and is listed as probable. Running back Knowshon Moreno (hamstring) is listed as questionable after being limited in practice all week, and linebacker D.J. Williams (elbow) is also listed as questionable.