Malaysian prime minister Najib Razak told a press conference in Kuala Lumpur that a new analysis by the UK Air Accidents Investigation Branch and tracking firm Inmarsat had revealed that MH370's last position was in the ocean west of Perth.
"This is a remote location, far from any possible landing sites," he said. "It is therefore with deep sadness and regret that I must inform you that according to this new data Flight MH370 ended in the southern Indian Ocean."
He added that Malaysia Airlines had already spoken to the families of the passengers and crew to inform them of the latest development.
"For them the past few weeks have been heart-breaking. I know this news must be harder still," he said.
Mr Razak said a press conference would be held tomorrow with further details.
Mr Razak said that British firm Inmarsat had employed "a type of analysis never before used in an investigation of this sort".
The new data revealed that MH370 flew along the southern corridor where investigators had said the plane could have travelled along, based on pings sent several hours after it disappeared on March 8.
Investigators had drawn up two huge search areas in two large arcs - a northern corridor stretching from Malaysia to Central Asia and a southern corridor extending down towards Antartica.
Inmarsat was not immediately available for comment, while the AAIB referred any inquiries to the Malaysian authorities, who they referred to as the "lead investigators".
MH370 went missing with 239 people on board, sparking an international hunt for any clues as to its whereabouts.
Police have considered hijacking, sabotage, terrorism or issues related to the mental health of the pilots or anyone else on board as possible lines of inquiries.
Relatives of the flight's passengers, many of whom have been staying at a hotel in Beijing as the search continued, reacted with despair to the news.
Heartbreaking footage of family members in tears were broadcast across the world.
Before today's bad news, relatives had spoken of their hope that the plane had been involved in a hijacking and landed safely.
Some had threatened to go on hunger strike in an effort to receive more information as the search dragged on.
Malaysia Airlines communicated the sad development to relatives in a text message ahead of Mr Razak's press conference.
According to the airline's website, it read: "Malaysia Airlines deeply regrets that we have to assume that MH370 ended in the Southern Indian Ocean.
"As you will hear in the next hour from Malaysia's Prime Minister, new analysis of satellite data suggests the plane went down in the Southern Indian Ocean."
The airline said that a translation of the message into Chinese was "in progress".
A spokeswoman for the AAIB said: "As set out by the Malaysian Prime Minister today, we have been working with the UK company Inmarsat, using satellite data to determine the area on which to focus the search.
"We are not able to comment further on this investigation, which is being led by the Malaysian authorities."
Several satellite images of potential debris in the southern Indian Ocean had been picked up ahead of the announcement.
French, Australian, American and Chinese authorities had all captured images of objects thought to have been debris from MH370.
Chris McLaughlin, senior vice president at Inmarsat, told Sky News: "We feel very, very sad and moved for the Chinese and other families that are affected by what seems to have been a major tragedy.
"We obviously take a professional sense of pride in the contribution but we don't diminish for a moment the sadness that will be around the families involved in this."