"This isn't a step backward for Scion; it's a leap forward for Toyota," Toyota Motor North America CEO Jim Lentz said in a statement.
"Scion has allowed us to fast track ideas that would have been challenging to test through the Toyota network."
Toyota launched Scion more than a decade ago with the great hope that the brand will attract a more youthful and trendy customer than that of its mainstream brand.
Although the brand started off strong, posting stellar sales figures from 2004 to 2008, the great recession and the lack fresh product led to a sharp drop in sales.
While Scion had some critical and sales successes such as the TC sports coupe and the XB crossover, it never lived up to Toyota's expectations in terms of sales and brand reach.
See the history of Toyota, through the years:
History of Toyota, through the years
Toyota has killed off its Scion brand
UNITED STATES - JULY 13: Toyota Land Cruiser Road Test - Nevada Centennial (Photo by Toby Palmieri/The Enthusiast Network/Getty Images)
UNITED STATES - MAY 12: 1966 Toyota Corona 1900 Sports Sedan. Road tested by Motor Trend Technical Editor Bob McVay. 'Spirited, miserly, rugged, and comfortable, Corona boasts a host of no-cost extras; makes sense for American buyers.' (Photo by Darryl Norenberg/The Enthusiast Network/Getty Images)
UNITED STATES - DECEMBER 02: 1966 8th Annual International Motorama - Great Western Exhibit Center. Rare Toyota 2000GT with license plate reflecting a custom 2000GT roadsters's recent appearance in the James Bond film You Only Live Twice. (Photo by Pat Brollier/The Enthusiast Network/Getty Images)
UNITED STATES - MARCH 06: 1968 Toyota Corolla - Dry Lake Bed - Female Model (Photo by Bob D'Olivo/The Enthusiast Network/Getty Images)
4X4 Toyota Land cruiser Vehicles In The Desert Of Sin, Sinai Peninsula, Egypt. (Photo By: MyLoupe/UIG Via Getty Images)
APR 16 1977; '77 Toyota Corona 4-Door Had Front Bench Seat; Toyota spokesman said the tradition bucket seats soon will return to the Corona Sedan models.; (Photo By Hugh Jane Jr./The Denver Post via Getty Images)
Claude Hovoet-Philippe de Leener-Freddy Fruhauf's Toyota Corolla's at La Source. Spa-Francorchamps 24 Hours, Belgium, 26-27 July 1980. (Photo by: GP Library/UIG via Getty Images)
APR 14 1981, APR 17 1981; The Toyota diesel pickup, introduced last month offers a quick-start feature that requires only a six-second wait preheat the combustion chambers during a cold start. Base price for the new little truck is $7,218, plus options. Fuel mileage checked out at 27 mpg in stop-and-go driving and 38 on the open road.; (Photo By Bud Wells/The Denver Post via Getty Images)
JAPAN - MARCH 01: Toyota Factory In Nagoya, Japan In March, 1990 - Toyota Factory In Nagoya. (Photo by Kurita KAKU/Gamma-Rapho via Getty Images)
JAPAN - OCTOBER 10: Solar Cars Competition In Kobe, Japan On October 10, 1990 - The Toyota won the golden prize. (Photo by Kurita KAKU/Gamma-Rapho via Getty Images)
CANADA - MAY 30: Winning ways: The third generation Camry's rounded looks and robust mechanicals have launched this midsizer on a sales roll. The well planned instrument panel offers large dials with clear graphics. The car is available with two engines - a 2.2 L four or 3 L V-6. In most driving; it's tough to tell the difference; Jim Kenzie says. (Photo by Bernard Weil/Toronto Star via Getty Images)
377387 02: Toyota Motor Co. Chairman Hiroshi Okuda sits inside Toyota's new 'Celsior' August 31, 2000 at a press viewing in Tokyo. The new Celsior offers the ample power performance required of top-class luxury car and supplements this with outstanding handling and driving stability. It has been designed for extreme dependability under a variety of conditions. (Photo by Koichi Kamoshida/Liaison)
Fuji Heavy Industries (FHI) President Yasuyuki Yoshinaga (Center-L) and Toyota Motor Corporation (TMC) President Akio Toyoda (Center-R) shake hand during a photo session at the line-off ceremony of the Subaru BRZ and Toyota 86 at Subaru's Gunma main plant in Ota-city, Gunma prefecture on March 16, 2012. Fuji Heavy Industries Ltd. (FHI), the manufacturer of Subaru automobiles, and TMC first agreed on business collaboration in October 2005. AFP PHOTO / KAZUHIRO NOGI (Photo credit should read KAZUHIRO NOGI/AFP/Getty Images)
MIAMI, FL - NOVEMBER 09: 2012 Toyota Camrys are seen on a sales lot on November 9, 2011 in Miami, Florida. Toyota Motor Corp. issued a recall for about 550,000 vehicles worldwide after the company announced the vehicles being recalled may have a problem that affects steering. The auto maker announced the recall for vehicles that include certain models of the 2004 Avalon along with the 2004 and 2005 Camry, Highlander, Sienna, and Solar as well as the 2006 Highlander Hybrid version. Also being recalled are some Lexus models that include the 2004 and 2005 ES330 and RX330 and the 2006 RX400h. (Photo by Joe Raedle/Getty Images)
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"Over the last dozen years, Scion products have not resonated with consumers, and the lineup grew stale despite recent attempts to revitalize it," Kelley Blue Book senior analyst Rebecca Lindland said in a email.
"It's the right move for Toyota from a cost standpoint, and allows them to reallocate and focus resources to profitable lines."
With an annual sales target of 100,000 cars, Scion managed to deliver fewer than 60,000 last year.
Citing the young average age of the brand's customers, Lentz, who was Scion's founding vice president, believes Scion did what it set out to do.
"I was there when we established Scion and our goal was to make Toyota stronger by learning how to better attract and engage young customers," Lentz said.
"I'm very proud because that's exactly what we have accomplished."
Beginning with the 2017 model year, Scion's lineup of vehicles will be sold under the Toyota brand.
According to the Japanese auto giant, the service and repair process for Scion customers will remain unaffected. Scion owners will continue to receive those services from Toyota dealerships and service centers.