Honda is pulling out of Formula One, blaming the world economic crisis for plans to sell its team.
Sources told BBC Sport the team were “optimistic” they would continue, but an investor had not yet been found.
The decision leaves Englishman Jenson Button and 2009 team-mate Rubens Barrichello without drives, with only a few mid-ranking seats still available.
Honda, which spent more than £300m a year on F1, said it would also no longer supply the sport with engines.
A deadline of January has been set to find a buyer but workers at Honda’s Brackley base have been told to expect redundancy letters before Christmas.
“Honda Motor Co. has come to the conclusion that we will withdraw from all Formula One activities, making 2008 the last season for participation,” said Honda president Takeo Fukui at an emotional press conference.
“This difficult decision has been made in light of the quickly deteriorating operating environment facing the global auto industry… and the sudden contraction of the world economies,” he added.
“Honda must protect its core business activities and secure the long term as widespread uncertainties in the economics around the globe continue to mount.”
According to the Reuters news agency, team bosses Ross Brawn and Nick Fry told a meeting of the Formula One Teams’ Association: “They have a month to find a buyer, otherwise they are closing the team.”
If no buyer is found, Honda’s decision will leave F1 with just 18 cars on the grid next season.
Honda said next year’s Japanese Grand Prix at its Suzuka circuit would go ahead as planned.
Honda appointed Brawn, the man who masterminded seven world titles for Michael Schumacher at Benetton and Ferrari, as their team principal prior to the start of the 2008 season.
His arrival was seen as the signal for the start of a concerted push for success by the company after several seasons as also-rans.
The company returned to F1 as a team owner and car builder in 2005, having spent five years as an engine supplier to the British American Racing team.
But they have struggled to make an impact at the top levels of the sport.
Their sole victory of the modern era came with Button,s win at the Hungarian Grand Prix in 2006.
But they have been uncompetitive in the last two seasons.
Honda’s decision could also spell the end of Barrichello’s 16-year F1 career.
The 36-year-old winner of nine Grands Prix was competing with his novice compatriot Bruno Senna, the nephew of F1 legend Ayrton Senna, for a seat at Honda in 2009.
Honda recently cut road vehicle production as a response to the global economic crisis – the company’s sales in its key US market were down 30% last month.
F1 is a notoriously expensive sport in which to compete, and teams have spent recent months in intensive discussions over cost-cutting measures.
Max Mosley, president of world motorsport governing body the FIA, recently urged teams to find ways to reduce costs.
In an exclusive interview with the BBC, Mosley described Honda’s withdrawal as a significant warning to the rest of the teams to start cutting costs dramatically.
Mosley wants to make drastic changes for the 2010 season – including making a standard engine and gearbox available to all teams at a projected cost of 5m Euro (£4.4m) per team.
The idea is opposed by the road-car constructors still in F1, who are proposing a new engine formula of their own.
Considered a major player within F1, Honda bankrolled more than 800 staff at the team’s Northamptonshire base and had one of the largest budgets in the sport.
“I am told that for £1 you can now buy the Honda F1 team,” said BBC sports news correspondent Adam Parsons.
BBC Radio 5 Live’s F1 commentator, David Croft, said Honda’s withdrawal could have profound consequences for the sport.
“This has serious implications for F1, not just because there will be only 18 cars on the grid,” said Croft.
“It’s the start of the sport as a whole feeling the pinch. Williams are reported to be in financial difficulties, Toyota are trimming down their budget as well.
“Honda are a car company whose sales have dropped by 41% in the last quarter, they’re closing their Swindon factory for two months at the start of next year, and obviously feeling the pinch on a global scale.”
In November, Honda announced it would build fewer cars in Japan, Europe and the US to reflect bleak economic prospects in the vehicle manufacturing industry.
Sales of new cars in the UK suffered their biggest monthly drop in 28 years, while car makers Ford, GM and Chrysler have asked the US Congress for multi-billion dollar loans to guarantee their survival.
The last team to leave F1 were Honda-backed minnows Super Aguri, which folded for financial reasons in April.
Honda’s own F1 team endured a deeply disappointing 2008 season on the track, earning just 14 points, leaving them the lowest of the nine points-scoring teams.
Button found himself ranked 18th in the drivers’ list, contributing only three points.
Only four drivers, each without a point to their name, ranked below him. Barrichello earned the remaining 11 points – more than half of them earned with a third place in the wet British Grand Prix.
Honda initially entered F1 as a constructor in the 1960s, withdrawing at the end of 1968.
The company returned to F1 in the 1980s as an engine supplier with great success with the Williams and McLaren teams and then purchased a stake in the BAR team from British American Tobacco (BAT) in 2004.
Honda bought out BAT in 2005 to form the Honda team for the 2006 season.
While the team finished fourth in the 2006 constructors’ championship, they have subsequently struggled to make an impact.
The 2009 Formula One season begins on 29 March, in Australia.