The high-profile summer signing has been suffering with the injury recently and it has been decided he will go under the knife in a bid to cure the problem.
The Italy international has returned to Milan as City confirmed the injury to his lateral meniscus. They had hoped to avoid surgery but after his recovery suffered a set-back, an operation became necessary.
A statement on mcfc.co.uk said: "The Italian's injury is to the lateral meniscus, one of the two most crucial structures in the knee, and medical wisdom is to try and encourage the problem to heal without recourse to an operation.
"It was hoped that the symptoms would settle down but once Balotelli began to step up his recovery programme this week, it became clear that action would need to be taken."
Balotelli is set to miss key matches against Chelsea in the Premier League and Juventus in the Europa League but could return for the visit of Arsenal on October 24.