The company made the announcement on Friday as part of a major shake-up by parent company Ford, reports the BBC.
Jaguar chairman Joe Greenwell said: "Ford has decided it can no longer make a compelling business case for any of its brands to compete in F1."
Reports suggest Tony Purnell, head of Ford's premier performance division, is putting together a bid to buy Jaguar's Formula One operation.
Jaguar's F1 businesses are now up for sale, and the future of the Ford rally team remains uncertain, with sportbusiness.com reporting yesterday that they may participate in European events only.
Greenwell added: "Jaguar's presence in Formula One has been a valuable marketing and brand awareness platform particularly outside our main markets of the US and the UK.
"However it was our collective view that it is time for Jaguar Cars to focus 100 per cent on our core business."
Ford's vice-president Richard Parry-Jones said the decision to pull Jaguar out was a warning that more needs to be done to help small manufacturers succeed in the sport.
The GPWC Holdings company has been battling for a greater slice of F1's profits on behalf of manufacturers.
But despite the promise of restructuring, the sport's commercial rights continue to be controlled by the holding company Slec - which is joint-owned by F1 supremo Bernie Ecclestone and three big banks.
"The GPWC has been too slow in making progress," Parry-Jones said .
"The current structure of F1 does not encourage smaller participants to make an investment.
"I think Jaguar's withdrawal will highlight the awareness of the need for change."
