The paper's roughly 200 employees are now out of jobs, but are free to apply for other positions within News International, the company said.
The 168-year-old newspaper, which sells more than 2.5 million copies every Sunday, was brought down by an avalanche of public and political fury in the wake of revelations that the hacking victims included a missing 13-year-old girl who was later found to have been murdered.
In an interview for UK media, James Murdoch said he, his father and the company felt "regret" over what had happened.
He insisted he was satisfied that Rebekah Brooks -- the current chief executive of News International and former editor of the News of the World who has been the target of calls to step down -- "neither had knowledge of nor directed the activities."
Who is Rebekah Brooks?
He said the company was committed to doing the right thing, by cooperating with police and putting in place a process to make sure such practices did not happen again. All revenue from the paper's final edition will go to "good causes," he said earlier.
On Wednesday, Rupert Murdoch himself called allegations against his flagship Sunday paper "deplorable and unacceptable."
Prime Minister David Cameron Wednesday called the possibility that the hacking had taken place "absolutely disgusting" and backed calls for an independent inquiry into the affair after a police investigation concludes.
The scandal is potentially damaging to Cameron himself because he is close to current and former top officials at the News of the World's parent company, former Tony Blair spokesman Alastair Campbell told CNN Thursday.
What happened? Phone hacking scandal explained
Police launched a special investigation into the allegations of phone hacking on behalf of the newspaper in January of this year. It was the second police probe into the issue.
On Thursday, shortly before James Murdoch's announcement, police said they have identified the names of nearly 4,000 potential victims.
Police launched the new investigation this year in response to widespread complaints from high-profile figures who feared they may have been targets.
But the revelation this week that victims may have included the murdered girl, the families of terror victims and of British troops killed in Afghanistan and Iraq, raised the scandal to a new level.
The Royal British Legion, a top military veterans' organization, said Thursday it was suspending ties with the newspaper after the accusations.
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