Tobacco company Philip Morris says it will cease manufacturing cigarettes in Melbourne by the end of the year.

The international tobacco giant has been making cigarettes at its Moorabbin plant for nearly 60 years, but will now shift production for the local market to Korea.

About 180 employees will lose their jobs at the factory, although Philip Morris (PML) says it will still employ about 550 people in its Australian corporate operations, which will remain headquartered in Melbourne.

Philip Morris said the decision was due to a gradual decline in the local market over the past decade and Australian Government regulations introduced in 2010 that required locally made cigarettes to conform to standards that reduced fire risks.

"Despite the introduction of plain packaging and the continued growth in illicit trade, PML's volumes were stable in 2013," said the company's managing director for Australia, John Gledhill.

"However, with any significant export opportunity restricted by Australian Government regulations, our Moorabbin factory is significantly underutilised, operating at less than half of its currently installed capacity."

Philip Morris says it will provide "extensive support" to affected employees, including redeployment opportunities where feasible, counselling, career transition support and financial advice.

The Australian Workers' Union's Victorian secretary Ben Davis says it will do all it can to help the workers.

"We'll obviously be meeting with the company and from here on in to work out what, if anything, we can do to make sure our workers have the best possible exit from the business," he said.