The move comes two months after competitor NEC said it was pulling out of the market citing tough competition.
"We will suspend developing new smartphones for the business-to-consumer market in Japan, and instead will pour our business resources into smartphones for the business-to-business market that is expected to grow," Panasonic said in a statement.
Corporate smartphones are devices used in businesses such as warehouses and hospitals where a number of people have to share up-to-date information across a large area.
Japanese electronics makers have struggled to compete since the rise of smartphones, and have been left behind by US giant Apple and South Korea's Samsung. The two companies' flagship phones have a large share of Japan's smartphone market.
NEC said in July it plans to exit its smartphone business, with chief financial officer Isamu Kawashima saying "we were late to enter the smartphone market, and we were unable to develop attractive products".
In the three months to June, Panasonic booked a net profit of 107.8 billion yen ($1.08 billion), up 742 percent from a year earlier. Operating profit stood at 64.2 billion yen, up 66.3 percent.
However its mobile phone unit Panasonic Mobile Communications booked an operating loss of 5.4 billion yen, despite a 86 percent rise in sales.
Panasonic and its domestic rivals, including Sony and Sharp, have been undergoing painful restructuring aimed at stemming years of record losses largely tied to their electronics units.