The Victorian government will announce the early closure along with a $200 million transition package for timber workers in Tuesday's budget.
The state government had planned to phase out native logging in 2030, but the industry will now be phased out and closed by the end of 2024.
Logging activity had been hamstrung in recent months following legal action against state-owned forestry company VicForests for failing to protect endangered possums.
The Victorian timber industry employs about 15,000 people and accounts for about a quarter of Australia's log harvest volume.
The state government said every Victorian timber worker would be supported to find a new job.
"It's not good enough for us to just cross our fingers and hope for the best," Premier Daniel Andrews said in a statement.
"That's why we're stepping up to give these workers – and their communities, businesses, and partners along the supply chain – the certainty they deserve."
Agriculture Minister Gayle Tierney said the government had not taken the decision lightly, but uncertainty in the industry could not continue.
"We will back local communities with the financial support, secure jobs and training, and one-on-one case management they need," she said.
Australian National University forestry ecology professor David Lindenmayer said the end of Victorian native logging was the equivalent to preventing emissions from more than 700,000 cars.
"This decision means Victoria and Australia have a far greater chance of meeting their emissions reductions targets," he said.
Victorian Forest Alliance campaign co-ordinator Chris Schuringa said conservationists had been fighting for the outcome for decades.
"This is a monumental win; for forests, for wildlife, for climate," he said in a statement.
"The next priority is to focus on supporting workers through a just transition and restoring Victoria's native forests, which will provide real, lasting, sustainable employment for regional communities."
Prof Lindenmayer agreed the decision would be positive for jobs.
"A major workforce will be needed to build new tourism infrastructure, protect and then boost carbon stocks, tackle problems with exploding numbers of feral deer and develop elite fire-fighting crews to make rural communities safe," he said.
Victorian Greens deputy leader Ellen Sandell welcomed the decision but stopped short of applauding the state government.
"For too long Labor has given millions of taxpayer dollars to the logging industry to destroy our precious native forests," she said.
"This is a win for all the environment groups, local community members and Greens who have fought to protect our native forests from logging and against a Labor government who have been dragged kicking and screaming to this position."
AAP has contacted the CFMMEU, VicForests and the Australian Forest Products Association for comment.
15°C