The move is likely to result in future layoffs among the plant's 5,000-strong workforce, but how many and when will not be decided until later this year or early 2011, said Boeing spokesman Jerry Drelling.
Workers had been warned in recent months that job losses were possible because of reduced domestic demand for the massive cargo plane, Drelling added.
"We're still completing the analysis of any reduction in workforce, and we're striving to mitigate the impacts on our employees as much as possible," Drelling said. "But it's something that needs to be done given reduced demand domestically and to ensure the aircraft remains affordable in years to come."
The scaling back of production, expected to begin in mid-2011, comes as Boeing aggressively pursues international orders from customers that include India and possibly Saudi Arabia.
India submitted a formal request in January with the Department of Defense to negotiate the purchase of 10 C-17s, but those jets would not likely get built until 2013, forcing Boeing to scale back production to keep the plant operating long enough to secure foreign orders.
"This move allows us to reduce the annual production rate and lay the foundation to extend the line beyond 2012 with new and existing orders, preserving the C-17 as an affordable option for the future requirements of international and domestic customers," Drelling said.
Boeing has built 194 C-17s since production began in the early 1990s, and has 38 jets on order, including 29 for the U.S. Air Force, six for the United Arab Emirates, two for Qatar and one for the United Kingdom.
Qatar, which has purchased three C-17s so far, retains the option for two more and is expected to sign a deal in coming months.
Saudi Arabia has also reportedly expressed interest in purchasing several C-17s in coming years, but formal talks have not begun.
Boeing's announcement comes nearly a month after President Barack Obama requested in his proposed 2011 defense budget that domestic funding for the C-17 end, saying the 223 in service and on order are enough for the nation's needs.
President Obama had also sought to end support for the plane last year, but was overridden by the Senate and House, who included $2.5 billion for 10 more C-17s in the final defense budget. Those planes will be built in 2011 and 2012.
Still, given the mood in Washington and President Obama's insistence that funding must end for "unnecessary" military equipment, Boeing has focused increasingly on foreign orders.
To date, the aerospace giant has sold C-17s to Canada, United Kingdom, Qatar, United Arab Emirates and a NATO-led peacekeeping force based in Hungary.
Most of those nations have used the plane for humanitarian missions, including after the recent earthquake in Haiti, where dozens of C-17s from across the globe were called in to deliver tons of medical supplies, food, water, personnel and other relief aid to the devastated island nation.
The plane is favored because of its enormous payload and ability to land on short, unpaved runways.
Just hours before Boeing's announcement Tuesday, Long Beach Councilman Robert Garcia met with Congressmembers in Washington to gauge support for the C-17 as part of a diplomatic mission to the nation's capitol.
"We spent a considerable amount of time talking about the C-17, and my sense is that there remains strong support for keeping the plant open," Garcia said. "(Congress) understand how important this is to Long Beach and to the country. It's a critical asset."
Garcia was joined in Washington by Third District Councilman Gary DeLong and Long Beach Government Affairs Director Tom Modica.
"Ensuring the continuation of the C-17 plant and keeping those 5,000 jobs in Long Beach is my top priority right now," Garcia said. "It's on the top of most of our lists."
Drelling said the production cutback should be sufficient to sustain the line well into 2013. He said the plan is to build 15 jets this year, 13 in 2011 and 10 in 2012.
"We feel it will both buy us more time and help up maintain an affordable price for future orders, as well as giving the (Department of Defense) more time to consider their future airlift needs," Drelling said.