Iyer picked up the injury while taking the catch to dismiss Australia wicketkeeper-batter Alex Carey, showing signs of pain while making impact with the ground.
The 30-year-old immediately clutched his rib cage and signalled for medical attention but was immediately taken off the field and did not return for the remainder of Australia's innings.
A member of the BCCI's medical team has remained in Sydney with Iyer in hospital while the squad departed for Canberra for the start of the T20I leg of the tour.
"Shreyas Iyer sustained an impact injury to his left lower rib cage region while fielding during the third ODI against Australia," a BCCI release said.
"He was taken to the hospital for further evaluation, Scans have revealed a laceration injury to the spleen.
"He is under treatment, medically stable, and recovering well. The BCCI medical team, in consultation with specialists in Sydney and India, is closely monitoring his injury status.
"The Indian team doctor will remain in Sydney with Shreyas to evaluate his day-to-day progress."
India won the third ODI by nine wickets, but lost the three-match series 2-1 after going down in the first two games in Perth and Adelaide.
India completed their biggest ever win in Test cricket after annihilating Afghanistan by an innings and 300 runs on the third day of the one-off clash in Chandigarh.
Suryakumar Yadav has been axed as India T20 captain and dropped from the squad while 15-year-old Vaibhav Sooryavanshi received his maiden call-up for the series in Ireland and England.
Sai Sudharsan is set get an extended opportunity to bat at number 3 in India's Test team, according to head coach Gautam Gambhir.
Teenage batting sensation Vaibhav Sooryavanshi has earned high praise from India batting legend Sachin Tendulkar after an outstanding season in the 2026 Indian Premier League.
