BAE will cut a total of 1,775 shipbuilding jobs, including 940 in Portsmouth next year when the yard will close, and 835 across Filton, near Bristol, Glasgow and Rosyth in Scotland through 2016. The decision follows intense negotiation with the government.
The Portsmouth yard employs 1,200 people and is a part of an 800-year tradition in the south coast town.
The job cuts come as the defence giant scales down its shipbuilding operations, as part of a maritime defence review. The move will follow the company's completion of two aircraft carriers for the British navy.
With the Scottish referendum in 2014, the decision on Portsmouth has become highly politicised. The Scottish yards will stay open and carry on building the Type 26 frigate.
The end of shipbuilding at Portsmouth will see the UK lose its ability to build its own warships, should Scotland become independent. BAE systems' decision has sparked anger from Politicians in Portsmouth who see the decision as politically-motivated - a way to prevent giving ammunition to those who want to see Scotland independent.
The prime minister said this morning during Question Time in parliament that "extremely difficult decisions" has been taken, adding that "our first thoughts should be with all of those affected".
When it came to allegations of a Scottish shipyard bias, he said "if there was an independent Scotland, we would not have any warships at all."