The 26-year-old felt discomfort in his right knee during the recent limited-overs series against England and Australia and a scan at the time revealed a "bone defect".
A further scan in recent days has shown that the defect had deteriorated further and that he would now require to undergo surgery to get it fixed.
Santner will be operated on later this week, before he begin an extensive rehabilitation.
Confirming the news, the New Zealand Cricket (NZC) said that Santner experienced some discomfort while playing and now scans showed that a "bone defect" had deteriorated and is required him to undergo surgery.
"Mitchell is a key player in all three formats for us, so we'll certainly miss him in the upcoming series. It's important though that he gets this fixed and we have him back for what is a big next 18 months for us," New Zealand coach Mike Hesson said.
The injury also looks set to rule the all-rounder out of the Indian Premier League (IPL) and English county cricket in coming months.
While leg-spinner Todd Astle has been called in as a Santner's replacement for the upcoming Test series, wicketkeeper-batsman BJ Watling has also returned to the side after recovering fully from a hip injury.
New Zealand: Jeet Raval, Tom Latham, Kane Williamson (captain), Ross Taylor, Henry Nicholls, Colin de Grandhomme, BJ Watling, Todd Astle, Tim Southee, Neil Wagner, Matt Henry, Trent Boult. (ANI)