The first-time All-Star faces four to six months of rehab after the procedure, according to MLB.com. Dodgers orthopedic surgeon Dr. Neal ElAttrache will perform the surgery Monday.
Machado tore his medial patellofemoral ligament Sept. 23. He decided to have surgery after consulting with several doctors.
"I sent my MRI results to a couple of doctors and knee specialists and we decided that in the long run and for my future as a baseball player, this surgery would be the best plan," Machado said in a statement released by the team. "I will immediately begin the rehabilitation process in hopes of being ready for the start of Spring Training."
Machado, 21, played in every game this season before the injury, which occurred when he stepped awkwardly on first base in a game at Tampa Bay.
He hit .283 with 14 homers, 71 RBIs and 51 doubles.
"He has the full support of the Orioles organization with this decision," Orioles executive vice president of baseball operations Dan Duquette said of Machado, "and we look forward to seeing him back on the field in Sarasota at full strength."
Information from The Associated Press was used in this report.