Terry looked in some distress as he went off on a stretcher following a collision with Liverpool striker Luis Suarez last weekend.
However, an MRI scan revealed Terry had escaped serious injury and Di Matteo had a further positive update in his press conference on Friday.
"With JT we're looking at approximately three weeks out," said Di Matteo. "Fortunately it's not as bad as we first thought."
Terry is now expected to miss up to five Premier League games, as well as the remaining two Champions League group fixtures against Juventus and Nordsjaelland.
Di Matteo also revealed that Frank Lampard is closing in on a return to action having not played since October 23 due to a calf injury.
He added: "Frank Lampard won't be featuring at West Brom but he's not far off, we want to make sure he's 100 per cent and not take risks."