The changes will also see the firm close two of its three overseas TV manufacturing facilities.
The Japanese company said it would focus on emerging markets including Asia and Africa, and end sales in “unprofitable regions”.
Toshiba, like other Japanese TV makers, has been hit by slowing demand, falling prices and increased competition.
The company’s digital products division, which includes TV manufacturing, saw its losses widen to 16.3 billion yen ($166 million), in the financial year to March 31, compared with a loss of 3.3bn yen a year earlier.
Toshiba, which makes the Regza brand TV sets, said in a statement that the changes were aimed “toward improving profitability and strengthening foundations of the business”.
The company said it would separate the TV business from its Digital Products & Services Company and merge it with Toshiba Home Appliances Corporation.
Toshiba said that it would move resources towards making large screen ultra high-definition (HD) 4K LCD TVs “where growing demand is expected”.
Leading global manufacturers have been looking at this segment, which offers four times the amount of detail as 1080p high-definition TV, as an area of potential growth.
Panasonic and South Korea’s LG are among the manufacturers that have launched ultra HD TVs.
Toshiba’s move to focus on the technology also comes as Japan is looking to become the first country to broadcast 4K programming over satellite from 2014, in time for the football World Cup.
Earlier this year, a Japanese telecoms company said that it was carrying out tests to try to prove that 4K-resolution video could be streamed over the internet to television set-top boxes.
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