The present series of 'Big Brother' runs for 13 weeks, and includes at least an hour of programming a day on the main channel. There is also the 'Celebrity Big Brother' series, which runs for around three weeks in January.
Channel 4 said that the cancellation would free as many as 200 first-run hours in peak time on Channel 4 and E4, and that it would boost the original drama budget by £20m in 2011 to help fill the gap created by one of its biggest hits.
The broadcaster also denied that it was axing 'Big Brother', which first appeared in 2000, on purely commercial grounds. It said creativity was an issue.
Kevin Lygo, director of television and content, said: "'Big Brother' is still profitable for Channel 4 despite its reduced popularity and there could have been the option to renew it on more favourable terms.
"That's what a purely commercial broadcaster would have done, but Channel 4 has a public remit to champion new forms of creativity."
He said that the cancellation would not solve its funding issues, but that the "significant sums that have been committed to 'Big Brother' in the past should now be available to boost budgets in genres, such as drama, that have had to be cut back sharply during the downturn".
'Big Brother' producers Endemol have said that they believe the format has a strong future in the long term. There is a likelihood that it will be picked up by another broadcaster once the Channel 4 contract is at an end.
A spokesman for the company said: "This is a show that has had an unprecedented impact on the TV landscape and as stated by Channel 4 today, one that continues to be commercially successful a decade on. We have every intention of celebrating the show's historic run on Channel 4 with great final series of both Celebrity Big Brother and the summer series in 2011."
Channel 4 is now looking to find a long-running sitcom, invest more in what it called "event dramas", like 'Red Riding' and 'The Devil's Whore', and create more television for younger viewers along the lines of 'Skins'.
Julian Bellamy, head of Channel 4, said: "'Big Brother' will leave a huge hole and filling it will involve the most fundamental creative overhaul in our history.
"We've 18 months to transform the schedule. Today's announcement is our biggest-ever creative call-to-arms to producers to come forward with their very best ideas."
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