The England goalkeeper is being heavily linked with a move away from the Etihad Stadium after being left out of City's staring line-up against Sunderland on Saturday, with reports suggesting he could be on his way to Everton.
Whether Hart has a future with City or not, Shearer feels new manager Guardiola should be honest with the 29-year-old who has been the club's number one for the best part of six years.
"If Guardiola does not fancy the England keeper as his future No 1 — and it appears that is the case — then he must tell him to his face so he can get on with his career elsewhere.
"Pep is entitled to select the team he wants but he must not string Hart along.
"If he tells Joe he is still part of his plans when he is actually planning to bring in another keeper, then I don't think that is fair.
"Hart is a proud man and is not at City to sit on the bench. He has a big decision to make about his future and needs the boss to be straight with him.
"If Joe has the hump, he has to get out of that and have a proper discussion with Guardiola about the way forward.
"Guardiola, for his part, should take a leaf out of his old enemy Jose Mourinho's book and let him know the score.
"It might seem harsh but many a big name in football has faced a crossroads like this one.
"I'm sure there will be a queue of clubs for his services and a move could be just what he needs.
"That could be good for Joe and good for England."