The 18-year-old, who stunned the world with his gold medal at the Rio Games, suffers from supraventricular tachycardia, a condition which can cause an abnormally fast heart beat and palpitations, and forced him to miss the 100m final at the Australian short course championships in November.
"The decision was not made lightly and involved careful consultation with Chalmers' doctor, his coach Peter Bishop and Australian Dolphins Swim Team Head Coach, Jacco Verhaeren," SA said in a statement.
"We decided it was in Kyle's best long term interest to get the surgery done sooner rather than later," his coach Bishop said.
"This will enable Kyle a good recovery period, before preparing for a home Commonwealth Games in 2018."
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Chalmers would have surgery in coming weeks and a decision on his replacement would be made internally, SA said.
Chalmers' withdrawal comes a month after compatriot and twice 100m freestyle champion James Magnussen said he would skip the July 14-30 championships in Budapest to focus on preparing for next year's home Commonwealth Games at the Gold Coast.
(Reporting by Ian Ransom; Editing by Greg Stutchbury)
