Tesco will launch a strategic review of Fresh and Easy, after losses from its US division.
Chief executive Philip Clarke announced the review on Wednesday alongside Tesco's third-quarter results. Tim Mason, who headed Fresh and Easy, is also to leave, having been with the company for 30 years.
Since conception five years ago Fresh and Easy has made considerable losses, predicted to reach £850m by February 2013. Tesco has invested £1bn in the ill-fated business, which failed to compete with US supermarket chains, including its main rival Wal-Mart.
Clarke said that the company, based mainly in Nevada and California, did not match US consumer preferences.