Rolls-Royce said it would cut 4,600 jobs - mainly in the UK - as part of a plan to simplify its business and save £400m a year by the end of 2020.
The engineering company said the job cuts and overhaul of its business would cost it £500m and be spread across 2018, 2019 and 2020.
It will be reported as separate one-off costs, allowing it to stick to its targets for free cash flow.
"These changes will help us deliver over the mid and longer-term a level of free cash flow well beyond our near-term ambition of around £1 billion by around 2020," chief executive Warren East said in a statement.
The staff reductions and upheaval at the business comes at a time when Rolls-Royce is under pressure in the biggest part of its business, its aero engines unit, after issues on some of its engines grounded planes and led to complaints from airline customers.
Rolls-Royce has 55,000 employees worldwide of which 26,000 are in Britain.
This latest reduction in staff follows previous job cuts under East, who joined the company three years ago with a mandate to turn it around.