The team entering its 30th season, run by Hans-Bernd Kamps, has also announced that its event company Project 1 Drivetime, which ran the BMW M2 Cup on the DTM undercard, will also close down.
A short statement released by the team on Monday evening said: "After numerous discussions with investors, manufacturers, partners and friends, we were unable to achieve a positive result for the continuation of our companies Project 1 Motorsport and Project 1 Drivetime.
"The generally difficult economic situation, which also affects motorsport, also contributed to this.
"For these reasons, we unfortunately have to file for bankruptcy for both Project 1 GmbHs. It pains us even more to have to do this in our 30th anniversary year."
In concrete terms, this means that insolvency proceedings are opened if the company is insolvent or over-indebted.
The team was founded in 1993 by Kamps and business partner Jorg Michaelis as Tolimit Motorsport, and soon caused a stir with its successes in Porsche Carrera Cup and also through sponsorship from Deutsche Post.
Project 1 Motorsport emerged from Tolimit Motorsport in 2013, and it ran Philipp Eng to the Porsche Supercup title in 2015.
It ran Christian Menzel (2005), Rene Rast (2012) and Eng (2015) to Carrera Cup titles, and latterly enjoyed success in the World Endurance Championship upon its arrival to the GTE Am class in the 2018-19 'super season'.
Jorg Bergmesiter, Patrick Lindsey and Egidio Perfetti claimed the title and also victory at the Le Mans 24 Hours at the first attempt.
Alongside its continued participation in the WEC with Porsche, in 2023 Project 1 entered the DTM as a BMW team but endured a disappointing season with Marco Wittmann claiming a best finish of fourth.
It had entered the four-round Asian Le Mans Series over the winter initially with two cars before slimming down to a single entry, and was unable to secure the Le Mans entry entitled to the series champion.
It is understood that the shift from GTE to LMGT3 regulations in the WEC was a considerable blow for Project 1, as only one team could represent each manufacturer and Manthey Racing was chosen to field Porsches, while WRT will run BMW's programme.
Project 1 negotiated intensively with two manufacturers in the hope of remaining on the grid, but without success.
The team had last week sent out a newsletter revealing its concerns, as rumours of the Lohne team's financial trouble had been circulating for some time.
"Economic slumps and uncertainty among investors can be bridged in the short term, but in the long term they are unfortunately threatening to the existence of medium-sized businesses," it said.
"We are currently in a lot of company with this. Unfortunately, these factors also influence the future of Project 1."
Project 1 would have had to forgo BMW's support in continuing the one-make M2 Cup this year because its multi-year contract ended with the 2023 season.
Since the vehicle used is a discontinued model that has not been sold for two years and there is no racing version of the current M2, BMW decided not to extend the contract.
Nevertheless, it had planned to continue the series solely through its own event company Project 1 Drivetime GmbH.
