Microsoft chief executive officer Satya Nadella said: "We are focusing our phone efforts where we have differentiation - with enterprises that value security, manageability and our Continuum capability, and consumers who value the same.
However, the planned reductions will not impact the employees working for Microsoft Oy, a separate Microsoft sales subsidiary based in Espoo, according to the company.
The company expects a significant part of the layoff process to be complete by the end of the calendar year and fully completed by July 2017, the end of the company's next fiscal year.
The company sold its entry-level feature phones business for $350m earlier this month.
In February, a report said that Microsoft was planning to shut down two mobile-phone manufacturing facilities in Beijing, China, cutting 9,000 jobs.
Beijing Youth Daily cited a source familiar with the matter as saying that the company was looking to move some of the manufacturing operations to Vietnam.