Sanchez, coming off a subpar 2012, injured the shoulder during a pre-season game against the New York Giants and was placed on injured reserve Sept. 14, opening the door for Smith to grab the starting slot.
After almost two months of attempting to rehab the shoulder without surgery, a decision was made to undergo Tuesday's procedure by specialist Dr. James Andrews, the signal-caller said in a statement.
"The injury was recovering at an encouraging rate early on, and I avoided surgery as long as I could, but ultimately I was counseled by the doctors that they simply would have to repair my shoulder," he said.
Sanchez will thus miss his fifth season with New York, which selected him with the fifth overall pick of the 2009 draft.
Smith, meanwhile, has played well for the 3-2 Jets, including engineering a last-second 30-28 win at Atlanta Monday.