Boeing said it would deliver 13 C-17s in 2011, one less than the prior year, as it moves to a new annual production rate of 10.
"Boeing will reduce the production program's work force by approximately 1,100 jobs through the end of 2012," the Chicago-based firm said in statement.
The transition to the new production rate was announced in February 2010.
The long-haul military cargo C-17, which is in its 18th year of service, can carry large equipment, supplies and troops directly to small airfields, the company says.
"The fleet continues to operate at an accelerated rate due to the recent troop surge in Afghanistan," Boeing said.
"It achieved two million total flight hours in December, less than five years after it passed the one-million-flight-hour mark."
The US Air Force is the biggest customer, taking 206 of the 226 C-17s delivered worldwide.
Boeing's foreign military customers include Britain, Canada, Australia, United Arab Emirates and Qatar, as well as the NATO-led Strategic Airlift Capability consortium.
The C-17 has also supported humanitarian and disaster-relief missions, such as providing relief to Haiti in the aftermath of a devastating hurricane a year ago.
Boeing said the move to a slower production rate "will be completed this summer" and lead to the elimination of the second shift at the C-17 final assembly facility in Long Beach, California.
About 900 of the planned 1,100 job cuts were expected to be made at the Long Beach plant. The remainder of the reductions will occur in Arizona, Georgia and Missouri.
"Reducing the number of C-17s we deliver every year - and doing that with a smaller work force - will allow us to keep the production line open beyond 2012, protect jobs, and give potential customers more time to finalize their airlift requirements," Bob Ciesla, C-17 program manager, said in the statement.
Boeing said it was working to capture additional international orders for the C-17, and that India and Kuwait were expected to be the next customers.
The Defense Department's proposed fiscal 2011 budget funds the shutdown of the C-17 program.
Boeing shares were down 1.69 per cent at $70.52 in midday New York trade.