The 25-year-old has started all ten of the region's competitive fixtures this season, scoring four Pro12 tries.
The region confirmed on Tuesday that Davies, who made 23 appearances last season, had broken a bone in his foot.
He will miss all of Scarlets' remaining European Champions Cup Pool three games as well as the Pro12 Christmas derbies.
The injury could mean Scotland international John Barclay switching to his more regular position of openside flanker after filling in at number eight, or Aaron Shingler moving from blindside.
Davies' sparkling form could have made him a contender for Wales' 2016 Six Nations squad, but this setback is set to rule him out.
"It's definitely a goal for James and he's definitely been heading in the right direction," said Scarlets head coach Wayne Pivac.
"He's behind a couple of very talented players but he's making a good case.
"Statistically he is the top tackler for us, the most carries, he is at the top of the breakdown list for us, so across the board in attack and defence he is a very valuable player for us."
Openside flanker is one of the most competitive positions in the Wales squad, with captain Sam Warburton and fellow British and Irish Lions player Justin Tipuric jostling for a starting spot.
Davies, however, has been touted as a potential rival for the number seven jersey having played a prominent role in the Scarlets' strong start to the season which sees them sitting second in the Pro12 table after seven wins from eight games.
Scarlets have cover in the form of Scottish international open-side John Barclay, who has been playing at number eight to accommodate Davies during this campaign.
"He [Davies] will be one that's sorely missed, but in John Barclay there is a silver lining," added Pivac.
"John has done a massive job for us playing at eight when his preferred his position is seven and we are also able to welcome back [number eight] Morgan Allen this weekend.
"It is a setback but, knowing the kind of guy James is, he will get into his rehab work once he has had his surgery and fight to get that 12 weeks down to 10 or whatever it could be. We wish him well."
Scarlets flanker James Davies has been ruled out for up to 12 weeks with a foot injury suffered in the closing stages of their Pro12 win over Zebre.