Tina Brown, editor-in-chief and founder of the online Newsweek Daily Beast Company, said the change means the magazine will "embrace the all-digital future. We are transitioning Newsweek, not saying goodbye to it."
Like other US magazines and newspapers, Newsweek has been grappling with a steep drop in print advertising revenue, steadily declining circulation and the migration of readers to free news online.
Circulation has fallen from more than four million a decade ago to around 1.5 million last year, and losses were mounting.
The last print edition in the United States will be the December 31 issue. Brown's note did not mentioning Newsweek's international editions, except to say the new digital version would be a single, worldwide product.
Newsweek, which had a fierce decades-long rivalry with fellow American coffee-table staple Time magazine, has in recent times been losing money steadily and struggling with the transition to online journalism.
"I think Newsweek lost its relevance and that is somewhat obscured by the digital transition," said Ken Doctor, an analyst with research firm Outsell.
"They didn't stand out as being a must-read, and you have to be a must-read in some way."
Doctor said that, even though Newsweek is a strong brand, it has to be able "to stand out in the clutter" to survive in the digital world.
Media analyst Rebecca Lieb of the Altimeter Group said Newsweek "has got to reinvent itself and it's got to do so under very challenging circumstances."
Lieb said Newsweek's demise "is symptomatic of the format" of a weekly news magazine and warned: "Time Magazine could well be next."
The Washington Post sold Newsweek to California billionaire Sidney Harman for one dollar in 2010, ahead of a deal with IAC to merge the magazine with the online operation to become known familiarly as "Newsbeast."
At the time of the sale in 2010, Newsweek had piled up more than $70 million in losses over the prior two years and had forecast more red ink. After Harman's death in 2011, his family ended its contributions to Newsweek.
Dan Kennedy, journalism professor at Northeastern University, said the synergies expected from the print-digital combination never materialized.
Kennedy said the owners believed they could stem Newsweek's losses by marrying it to a digital product but that "today's announcement shows that strategy failed."
"As for Newsweek's fate, the paid-digital strategy strikes me as little more than a face-saving move. I can't believe more than a handful of people are going to sign up," Kennedy said on his blog.
"At some point I wouldn't be surprised if Newsweek becomes just a tab within the Daily Beast used for the sole purpose of signifying that it still exists. If just barely."
Brown acknowledged the change will mean layoffs "both here in the United States and internationally."
She said the all-digital publication will be "targeted for a highly mobile, opinion-leading audience who want to learn about world events in a sophisticated context."
Barry Diller, chairman and chief executive at the conglomerate IAC, said in July that his firm was looking at new options including moving to digital.
Diller indicated recently that Newsweek was losing money, but the IAC conglomerate did not break out details.
Newsweek is owned by IAC, whose assets include Match.com, Ask.com, CollegeHumor, and CityGrid Media, a stable it calls "one of the world's largest families of websites."
It recently acquired About.com from the New York Times Co.
The move by Newsweek also reflects a shift in advertising.
According to the research firm eMarketer, digital ad spending will grow to $37.31 billion in 2012, and outpace print for the first time in 2012, which will get $34.33 billion.
Brown cited a Pew Research Center report showing 39 percent of Americans get their news online and said Newsweek had reached "a tipping point at which we can most efficiently and effectively reach our readers in all-digital format."