If done correctly squatting shouldn't be affecting your knees. I have previously torn ligaments in my knee from football (soccer) and have no problems with squatting.

If the injury is new, as in you have just had it diagnosed then rest it up and take some anti inflammatory drugs to help the healing, at the end of the day squatting is the same as sitting down on a chair, so avoiding it is going to be difficult.

But at the end of the day I'm not going against drs advice so it may be worth discussing exercise with him.

you need to ask a physio, because the answer will depend on exactly what's wrong with your knee and exactly what kinds of movements you need to avoid

while it's true that squats should, in general, help rather than worsen knee and back issues, this advice depends on exactly what's wrong to begin with, as some kinds of injuries are worsened by squats and the same is true about a whole bunch of other exercises, including running, and pretty much everything. Please don't take advice on this matter from the internet!! Please go back to your doctor and ask for more specific advice on what exercises to do, if your doctor can't tell you, ask to be referred to a sports physio. There usually is a safe alternative exercise, but the advice needs to come from someone who a) knows all the specifics of your exact injury and b) is qualified to give that kind of advice.