The Blue Oval will close its Bridgend factory when production of the Jaguar Land Rover V8 ceases next year, but will retain a presence within the UK.
Ford will close its Bridgend engine factory in Wales as part of a wider restructuring of its European business.
Production of 1.5-litre engines will end in February 2020. The factory will close in September 2020 when Jaguar Land Rover shifts all V8 production to its new factory in Wolverhampton.
Ford has set aside US$650 million ($941 million) to deal with Bridgend's closure, with around US$400 million ($579 million) covering termination payments to employees.
The remainder of the money will cover pension expenses, accelerated depreciation costs and amortisation costs.
After Bridgend's closure, Ford's UK presence will include an engine factory in Dagenham, the Dunton Technical Centre, and its joint venture transmission plant with Getrag in Halewood.
“As a major employer in the UK for more than a century, we know that closing Bridgend would be difficult for many of our employees,” Stuart Rowley, president of Ford of Europe, said in a prepared statement.
“We recognise the effects it would have on their families and the communities where they live and, as a responsible employer, we are proposing a plan that would help to ease the impact.”
The demise of the Bridgend plant is the latest in a series of moves designed to turn around Ford's European operations. In March, the company announced it would fire 5000 people in Germany.
Later in the month, Ford announced it would close three factories in Russia, and end sales of passenger cars in the country. It has also axed the C-Max crossover, and closed a transmission plant in France.