The paper will publish its last edition this Sunday, Rupert Murdoch’s son said.
Murdoch, News Corp’s deputy chief operating officer, said the paper’s ethics "have been sullied by behaviour that was wrong - indeed, if recent allegations are true, it was inhuman and has no place in our company".
"The News of the World is in the business of holding others to account," he told staff. "But it failed when it came to itself."
The bombshell news follows growing pressure on Murdoch’s media empire with advertisers pulling revenue from the paper and allegations that its editors paid police thousands of pounds for information.
Advertisers have also began targeting the entire stable of News International papers, which include the Sun, Times and Sunday Times.
Major advertiser Shop Direct, which owns the Littlewoods brand has spent £665,000 on advertising in NotW over the past year, as well as £1.6m in the Sun, said it has pulled all advertising until the police investigation is concluded.
The public has been revulsed at allegations that the paper hacked the phones of murder and crime victims and the relatives of war dead.
The News of the World published its first edition on October 1 1843 and sells about 2.6m copies every week.