Saunders, who didn't practice with the team Tuesday due to a swollen thumb, was ruled out of the Bucks' game with the Cleveland Cavaliers.
WTMJ-TV, Milwaukee, reported he was involved weekend bar fight in downtown Milwaukee, which is being investigated by police.
Police released a statement indicating they went to local hospital to meet a 26-year-old man who claimed he was assaulted at the Apartment 720 Bar early Sunday. The victim said he was cut after being struck in the head with a bottle by a 24-year-old Milwaukee man.
The broadcaster, citing unnamed police sources, reported the suspect is Sanders, who signed a $44 million extension with the Bucks during the off-season.
"We are aware of an incident from Saturday evening," the Bucks released in a statement. "The matter is under investigation and Larry Sanders is cooperating fully. At this time we will have no further comment."
Sanders is averaging just 2.7 points and 3.7 rebounds in 17.3 minutes per game through three contests.