Walker is scheduled to undergo the procedure on Wednesday in New York.
The Charlotte Observer first reported that surgery could be necessary.
The Hornets will turn to veteran guard Brian Roberts to take over as the starting point guard, and use the trade market to find depth for the position, targeting Sacramento's Ramon Sessions and Miami's Norris Cole, among others, league sources told Yahoo Sports.
Walker has been struggling with a meniscus injury in the knee, but had been resolute on trying to play through the pain. Walker, who signed a four-year, $48 million contract extension in the offseason, has had occasional problems with a cyst in the left knee dating back to high school.
For the Hornets, the loss of Walker could be devastating to their playoff hopes. Despite numerous player injuries that have resulted in missed games, Hornets coach Steve Clifford has managed to work Charlotte (19-26) into the eighth spot in the Eastern Conference playoff chase.
Walker has missed three games in the past week, and there had been significant discussion among doctors and Hornets officials about the necessity of surgery.
Walker has averaged 18.8 points and 5.2 assists per game this season.
Charlotte is dealing with injuries to several key players, including Marvin Williams, Bizmack Biyombo and Jannero Pargo.
Around the league: