Shanahan is suffering the "lingering effects" of a severe concussion and also broke his nose and multiple ribs in the collision, said general manager John Lynch.
"Coach Shanahan will participate in team activities on a limited basis at the start of training camp while he recovers," said a 49ers statement.
His assistant, Chris Forster, and staff "will handle head coach responsibilities during this period," the team added.
The car accident reportedly took place on July 14th near Shanahan's northern California home, involving the coach's vehicle and an SUV.
Palo Alto police lieutenant Nicholas Martinez told ESPN that the other driver was not injured, no drugs or alcohol were involved, and no one was cited for the collision.
Lynch said Shanahan was being treated by doctors using the same concussion protocol applied to players, and the expectation is that he will resume head coach duties "long before" the NFL season begins in September.
"He's a tremendous head coach, but this is bigger than that. This is about his well-being, and we're going to take the time necessary," said Lynch.
Just 46, Shanahan is one of the NFL's most revered and influential coaches.
Beginning his coaching career primarily as an offensive coordinator, he has led the 49ers to two Super Bowl appearances in his nine-year tenure as head coach - losing in 2020 and 2024 to the Kansas City Chiefs.
Multiple other NFL head coaches previously worked under Shanahan, including the Las Vegas Raiders' Klint Kubiak, the Arizona Cardinals' Mike LaFleur and the Tennessee Titans' Robert Saleh.