Walters, a key player in Fremantle's forward structure, injured the tendon during the Dockers' Round 3 thrashing by Hawthorn.
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Following that loss, Freo coach Ross Lyon said if Walters needed surgery he would probably miss the rest of the season.
But the club had to wait over a week before any decision was made as doctors waited for the swelling to subside enough to assess the ankle.
However, after seeing a specialist in Melbourne on Wednesday afternoon, the decision has been made to send Walters into surgery.
Although the season looks over for Walters, Fremantle football manager Chris Bond would not give any indication on his recovery time.
"There was a slight possibility that the injury would heal itself and Michael would not require surgery," said Bond in a statement.
"Unfortunately, for Michael that is not the case and he will now undergo surgery later in the week.
"In the past he has shown great strength of character and great resilience, so we believe that with the appropriate recovery period and rehabilitation program, Michael will return to full training.
"At this stage, an assessment of how many weeks Michael could miss will be carried out after his surgery and recovery phase are completed."
After a tough start to life under Ross Lyon at Fremantle, Walters has been one of the competition's most improved players over the last 18 months, kicking 46 goals in 21 matches last season.
In some good news for the club, though, forward Chris Mayne (ankle) and midfielder David Mundy (concussion) are listed as tests, while Nat Fyfe will return from suspension to face Sydney at the SCG on Saturday evening.