Saunders, a 28-year-old Canadian, suffered the injury when he stepped on a soft patch of grass surrounding the head of a sprinkler while chasing a fly ball at batting practice on Wednesday.
Doctors said Saunders, who reported early for workouts to the Blue Jays' Florida camp for an early start on pre-season preparations, suffered a torn left meniscus.
The Blue Jays obtained Saunders from Seattle in an off-season deal for pitcher J.A. Happ and had hoped he would become Toronto's starting leftfielder.
Saunders has a .231 career batting average with 51 home runs and 182 runs batted in over 553 games with Seattle, although last season he played in only 78 contests due to a left oblique strain. He hit .273 with eight homers and drove in 34 runs for the Mariners in 2014.