The News of the World, Rupert Murdoch's embattled British tabloid, will lay off 200 workers and shut down publication after its Sunday edition.

The stunning announcement from Murdoch's son James came as the paper was vilified for reportedly hacking into the cell phones of crime and terror victims - and paying off London police for inside information.

"Wrongdoers turned a good newsroom bad," said James Murdoch, "and this was not fully understood or adequately pursued."

All revenue generated by the final ad-free edition will go to a "good cause," Murdoch wrote in a Thursday memo to the staff. The paper, long a London institution, sells nearly 3 million copies per week.

The laid-off workers can apply for new jobs inside Murdoch's massive worldwide media operation.

The latest blow to the 168-year-old paper was a published report that the tabloid had collected the telephone numbers of slain British troops.

Although it was unclear if those phones were hacked, the backlash against the newspaper was immediate.

"If these actions are proved to be verified, I am appalled," said Gen. David Richards, head of the British armed forces.

The tabloid issued a statement saying it would be "absolutely appalled and horrified" if the war veterans or their families were targeted.

The stunning allegations of corruption and illegal hacking led advertisers to start abandoning the newspaper, owned by Murdoch's News Corp.

Police said as many as 4,000 people were targeted by the tabloid.

British Prime Minister David Cameron said Wednesday that an investigation into the sordid mess was coming. The News of the World is Britain's best-selling Sunday newspaper.

Police are probing allegations that the newspaper hacked into the cell phones of teen-age murder victims, family members of people killed by terrorists, politicians and celebrities.

The Times of London, another Murdoch publication, reported that arrests of reporters suspected of hacking were expected in the next few days.

(Read by Lee Hannon. Lee Hannon is a journalist at the China Daily Website.)