The 33-year-old Calgarian tied for third in the super-G at the Sochi Games last year. It was Canada's first Olympic alpine ski medal in two decades.
Hudec suffered a torn meniscus racing the men's downhill on Dec. 19 in Val Gardena, Italy. He recently returned to Calgary and underwent arthroscopic surgery Thursday, Alpine Canada said in a statement posted on its website.
“I had to step back to make the right choice,” Hudec said. “I tried to put everything into perspective, where the season is currently at, in addition to the fact that I want to continue skiing.
"I am not done racing, I don’t want this to be my last year. I made this decision, looking long-term and what is in the best interest for myself, my body and next season.”
It was the eighth knee surgery of Hudec's career and the seventh on his right knee. The skier has posted on Twitter his excitement that his hospital gown tied at the side, instead of the back.
Team doctor Stephen French said the goal is to have Hudec ready to compete again next season.
The Canadian men's speed team will also be without Erik Guay for the Feb. 2-15 world championship in Beaver Creek, Colo.
Guay, the 2011 world downhill champion, is still rehabilitating after a pair of off-season knee surgeries last year. He is Canada's most decorated World Cup downhiller with 22 career medals.
Hudec won silver in the downhill at the 2007 world alpine championship. He started this season with four top-20 results, including a ninth-place finish in the super-G at Lake Louise, Alta.
“I want to be at world champs this year," Hudec said. "I really enjoy Beaver Creek, the tracks and the atmosphere. To miss the world championships there is difficult. But everything else points to this being the right decision for me.”