Shehzad had scored an unbeaten 126 on day one in Abu Dhabi and added another 50 to that score before a bouncer from Corey Anderson (2-68) crashed into the side of his helmet, forcing the batsman to fall to the ground and drop his bat into the wicket in a bizarre dismissal.
The Pakistan Cricket Board (PCB) has since confirmed that Shehzad has suffered a minor fracture to his skull and will be monitored closely for the next 48 hours.
But the departure of Shehzad did not spark a fightback from New Zealand, with the designated hosts ploughing on thanks to more fine batting from Younis Khan (100 not out) and captain Misbah-ul-Haq (102no), who declared after reaching his century with Pakistan on 3-566.
New Zealand survived the final seven overs of the day without losing a wicket, closing on 15, but have plenty of work to do in order to deny in-form Pakistan victory.
It soon became apparent that the tourists were in for another day of hard toil in the field as Shehzad and Azhar Ali (87), who brought up his 50 in the fourth over of the day, pushed Pakistan towards the 350 mark.
A 169-run second-wicket partnership finally ended with Shehzad's unfortunate departure, which was soon followed by that of Azhar, whose dismissal came courtesy of an exquisite delivery from New Zealand spinner Ish Sodhi (1-162).
The tourists' bowling attack came in for yet more punishment in a stunning partnership of 193 between Younis and Misbah, with the fourth-wicket pair continuing their excellent form which they produced in the recent whitewash of Australia.
Younis became the first man since 1925 to score a hundred in three straight innings against Australia, and was in sublime form yet again in a 141-ball knock which included 10 boundaries.
Meanwhile, Misbah, who tied Viv Richards' record for the fastest Test century in the second Test against Australia, profited from drives through mid-on as he made New Zealand pay for two drops early in his innings.
The duo each brought up their respective hundreds in the same over, prompting Misbah to declare and send his bowlers in to set about replicating their impressive performances with the ball against Australia.