The Minneapolis-based company said it reviewed its Canadian subsidiary's performance and concluded that it could not be profitable in the long run.
"This was a very difficult decision, but it was the right decision for our company," said Target CEO Brian Cornell.
The second-largest U.S. retail chain, Target (TGT) has struggled in the Canadian market for years. The company expects to report a loss of about $5.4 billion in the fourth quarter, driven largely by Target Canada's poor performance.
Despite its problems in Canada, Target's U.S. business remains strong.
Canadians camped outside stores at the Target grand opening
The retailer said the decision to close up shop in Canada will increase its earnings in the current fiscal year, and boost its cash flow in the years ahead.
Target had been counting on a strong holiday season to help turn things around, but that did not materialize, said Cornell.
Target is seeking a court's approval to set aside 70 million Canadian dollars, or $59 million, to cover the cost of providing 16-weeks of compensation and benefits for affected employees.
Overall, Target expects to pay between $500 million and $600 million to end its Canadian business. It says it has the cash to do so.
The Canadian stores will remain open during the liquidation process.
"There is no doubt that the next several weeks will be difficult, but we will make every effort to handle our exit in an appropriate and orderly way," he said.