New episodes will air until the end of the broadcast TV season in May 2026, the network said in a statement on Thursday.
"This is purely a financial decision against a challenging backdrop in late night. It is not related in any way to the show's performance, content or other matters happening at Paramount," CBS executives said.
Paramount Global, the parent company of CBS, is seeking approval from the US Federal Communications Commission for an $US8.4 billion ($A13 billion) merger with Skydance Media.
Paramount earlier in July agreed to settle a lawsuit filed by Trump over an interview with his former Democratic challenger, Kamala Harris, that CBS's 60 Minutes broadcast in October.
Colbert told his audience on Thursday that he was informed of his show's cancellation the night before.
The audience booed, and the 61-year-old comedian responded: "Yeah, I share your feelings."
The Late Show made its debut in 1993 with David Letterman as host after he was passed over for NBC's The Tonight Show.
Colbert, a regular on The Daily Show before he hosted The Colbert Report on Comedy Central, took over The Late Show in 2015.
"It is a fantastic job ... it's a job that I'm looking forward to doing with this usual gang of idiots for another 10 months," Colbert said on Thursday.
He thanked executives at CBS, his show's audience and the 200 people who work on the show.
Senator Adam Schiff, a Democrat, was a guest on Thursday's episode."If Paramount and CBS ended the Late Show for political reasons, the public deserves to know. And deserves better," Schiff wrote on X.
Colbert often skewered Trump in his nightly monologue and criticised Paramount's settlement with the president.
The comedian called the company's payment to Trump a "big fat bribe" on his show on Monday.
The audiences has shrunk for late-night shows as viewers shift from traditional television to streaming.
The Late Show drew an average of 2.5 million viewers during the 2024-25 season that ended in June, ahead of ABC's Jimmy Kimmel Live and The Tonight Show Starring Jimmy Fallon.
"Our admiration, affection, and respect for the talents of Stephen Colbert and his incredible team made this agonising decision even more difficult," said the statement from Paramount Co-CEO and CBS CEO George Cheeks, CBS Entertainment president Amy Reisenbach and CBS Studios president David Stapf.
