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The Malaysian Grand Prix confirmed that the race will be dropped from the calendar following the finish of this year's event which will take place at the start of October.
The Grand Prix has been on the calendar since 1999 and has become a fan favourite of the recent F1 tracks designed by Hermann Tilke.
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"The cabinet has agreed to end the contract starting 2018 after considering lowering returns to the country compared to the cost of hosting the (race)," prime minister Najib Razak confirmed in a statement.
It is also reported that in nearby Singapore, organisers and F1 are "locked in negotiations" about a renewal of the deal for the popular F1 street race, the local Today publication claims.
But referring to the news from Malaysia, F1 commercial boss Sean Bratches said: "It's always sad to say goodbye to a member of the formula one family."
The Malaysian news agency Bernama said PM Razak confirmed that Malaysian sponsor Petronas will continue to sponsor Mercedes despite the demise of the local race: "I also wish to express my appreciation to FOM for its understanding and agreement that 2017 will be the last F1 race at Sepang," he added.
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