Eaton sustained the blow during the Hurricanes' Super 14 victory over the Highlanders on Friday.
The 24-year-old will require an anterior cruciate ligament reconstruction and will be out of action for six months.
He said: "Obviously I'm very disappointed. I'm seeing a surgeon next week and we will take things from there.
"My focus will be on getting through the rehab work so that I'm in good shape for the start of the 2008 Super 14."
Eaton's absence is another blow to the All Blacks' second-row stocks.
Highlanders' James Ryan will miss the entire season with a similar injury, while Saracens-bound Chris Jack is nursing a hamstring strain which has left him in doubt for the Super 14 play-offs.