The news was confirmed at a press conference in Munich this morning, and comes on the back of a disappointing campaign for the outfit.
Dr. Norbert Reithofer, chairman of the BMW board, said that the decision was made after a refining of the company's future strategy.
"Of course, this was a difficult decision for us. But it's a resolute step in view of our company's strategic realignment," he said.
"Premium will increasingly be defined in terms of sustainability and environmental compatibility. This is an area in which we want to remain in the lead. In line with our Strategy Number ONE, we are continually reviewing all projects and initiatives to check them for future viability and sustainability. Our Formula 1 campaign is thus less a key promoter for us.
"Mario Theissen has been in charge of our motor sports program since 1999. We have scored a large number of successes in this period, including some in Formula 1 racing. I would like to express my sincere gratitude to Mario Theissen and his team for this."
BMW motorsport director Mario Theissen, who spearheaded the company's efforts as an engine supplier with Williams and then later with BMW Sauber, said he understood the reasons behind the withdrawal.
"Of course, we, the employees in Hinwil and Munich, would all have liked to continue this ambitious campaign and show that this season was just a hiccup following three successful years," he said. "But I can understand why this decision was made from a corporate perspective. We will now focus sharply on the remaining races and demonstrate our fighting spirit and put in a good result as we bid farewell to Formula 1 racing."
Dr. Klaus Draeger, member of the board who is responsible for development, said this season's poor results had played a part in the move to quit F1..."