The 27-year-old, a member of the All Blacks World Cup winning-squad in 2015, had a scan on Tuesday and was diagnosed with "a grade two MCL injury", the Otago Highlanders said in a statement.
"He is currently in a knee brace and will be unavailable for up to 6 weeks while he is rehabilitating," the team added.
The injury could not have come at a worse time for the Fiji-born Naholo, who has appeared short on confidence and has not played at the level that earned him 26 caps for the All Blacks.
His expected return in mid-May would give him just four regular season games to convince All Blacks coach Steve Hansen that he would be able to regain his form ahead of the Rugby Championship and force his way into World Cup contention.
Naholo is one of several All Blacks battling long-term injuries ahead of the Sept. 20-Nov.2 World Cup in Japan.
His Highlanders team mate Liam Squire also suffered a knee injury at training last month, while Sam Cane is still recovering from a broken neck he sustained last year.
Captain Kieran Read, who came back game from an extended break on Friday, was also an injury scare for Hansen as he had to be replaced after 40 minutes due to bruising to his right leg against the Wellington Hurricanes.
Naholo will be sorely missed by the Highlanders, who have lost three of their last four games and not won since week two of the competition, dropping to fourth in the New Zealand conference.
Their match with the Canterbury Crusaders three weeks ago was cancelled due to the shooting at two Christchurch mosques on March 15 that killed 50 people.
The Highlanders will face the Hurricanes in Dunedin on Friday before travelling to Christchurch for the return game against the table-topping Crusaders on April 12.
(Reporting by Greg Stutchbury; Editing by Sudipto Ganguly)
