Blackadder suffered the injury in the Crusaders Super Rugby Pacific quarterfinal win over the Queensland Reds last Friday.
Scans show Blackadder, who has played nine tests, now needs surgery and the Crusaders have confirmed he won't return to the field until next year meaning he will miss the entire All Black season.
"We really feel for Ethan, who has been in incredible form and is such a hardworking and well-respected member of this team," said Crusaders coach Scott Robertson.
"Our medical team will do what they do best and ensure he has everything he needs to be right for the 2023 season."
Robertson has named Tom Christie to start at openside flanker in place of Blackadder for Friday night's semifinal against the Chiefs in Christchurch.
All Blacks coach Ian Foster is due to name his first squad of the year on Monday.
The All Blacks begin their year with a three-test series against Ireland with the first test in Auckland on 3 July.