According to Cricket Australia, Smith will undergo surgery and is expected to wear a brace for six weeks before commencing rehabilitation.
The HBL PSL 2019 will be held from February 14 to March 17.
Smith is not expected to regain full fitness in this period.
"I am disappointed I won't be able to play in HBL PSL but I wish Multan Sultans all the best for this year's tournament," said Steve Smith .
"I was looking forward to playing the tournament and helping the team try to win the trophy. We have a talented team and I am confident that they will do very well", he said.A Pakistan Cricket Boards spokesman on Smith's injury said here "We are sad to lose a player of Steve's calibre but we wish him a speedy recovery."
"Hopefully we will see him in future editions of HBL PSL, the league fans would miss seeing him live in action this season," he said.
Multan Sultans will now seek a replacement for Smith at the Replacement Draft later this month. The Replacement Draft date with the pick order would be announced in due course.