Calling it "sad news," PlayStation chief Jim Ryan said that the reduction would affect 900 people across the globe, including video-game making studios.
The cuts would see the company's PlayStation London studio, which was founded in 2002 and specialized in virtual reality gaming projects, closed in its entirety, the company said.
A separate statement said that US studios Insomniac Games and Naughty Dog were also hit.
Hermen Hulst, head of PlayStation Studios, said more resources were needed as the company focused on mobile and PC gaming.
"We looked at our studios and our portfolio, evaluating projects in various stages of development, and have decided that some of those projects will not move forward," he said.
"Our philosophy has always been to allow creative experimentation. Sometimes, great ideas don't become great games," Hulst added.
The cuts come after Sony this month warned that sales of the PlayStation 5 would not meet original targets, with the flagship console currently in its fourth year on the market.
Sony's video game segment scored a hit with "Marvel's Spider-Man 2", which was released on the PS5 in October last year and became the fastest-selling PlayStation Studios game in the first 24 hours after release.
But the PlayStation 5 is facing stiff competition from the Nintendo Switch and could see a tougher rivalry with Microsoft's Xbox, after the tech giant's buyout of "Call of Duty" maker Activision Blizzard.
Microsoft in January said it was laying off 1,900 people, or eight percent of staff, from its gaming division as it consolidated the Activision acquisition.
In all, last year the tech industry lost 260,000 jobs according to layoffs.fyi, a California-based website that tracks the sector.
So far this year, layoffs are at 43,957, the site showed, from 171 companies.
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