The £250,000 brass statue was paid for by the family of former chairman Freddy Shepherd.
Shearer - now a BBC pundit - joined the club in 1996 for a then-record breaking £15m, going on to score 206 goals in 10 years, before becoming manager in 2009.
Shepherd said the statue would honour the striker's "unique career".
Northumberland artist Tom Maley has spent almost six months casting the 9ft 6ins (2.89m) structure, which shows Shearer celebrating a goal with his famous hand-in-the-air pose.
Shepherd said: "Alan was one of the greatest players ever to wear a Newcastle shirt.
"It is now 10 years since he retired and our family decided that fans shouldn't have to wait any longer for his unique career to be properly recognised.
"We are proud and delighted to have been able to create a lasting monument to not only a great footballer, but also a fine man who has done so much for the communities in Newcastle through his charity work."
Shepherd said the statue, which is outside the Milburn Stand of the ground, also recognised Shearer's contribution to local good causes.
He is a patron of the NSPCC, the Children's Heart Unit Foundation (CHUF) and the Sir Bobby Robson Foundation.
Workmen put the statue in place on Friday covered in blue plastic, surrounded by a fence a metal fence.
Newcastle United have so far not commented on the statue.
Former Blackburn Rovers and Southampton star Shearer scored 148 goals in 303 games for Newcastle - although won no silverware with the club - as well as bagging 30 goals in 63 games for England.
A statue to "properly recognise" the career of Newcastle United legend Alan Shearer is to be unveiled outside St James' Park on Monday.