The injury occurred in the first quarter of a 22-16 preseason loss to Buffalo. On the play, he was hit by Bills defensive back Coy Wire while he was fighting for a first down.
Stewart, a nine-year veteran, was placed on injured reserve Tuesday, which ended his season.
"The best thing for James and for the team is to put him on IR," said team president Matt Millen. "Looking at the injury, he is going to require surgery at some point in time. We have been told there is an 85 percent chance the thing would come out again. The best thing to do is to get the surgery now because it has to be done."
Stewart, who was Detroit's No. 1 running back, led the Lions in rushing last year with 1,021 yards in 14 games. He will be replaced by former 1,000-yard rusher Olandis Gary, who was obtained in a trade with the Bills on Monday. Stewart becomes the second Lion to be placed on the IR because of injuries suffered in the preseason. Starting cornerback Chris Cash was lost due to a knee injury.