McNish's team-mate, Finland's Mika Salo, has also been told his services will not be required next season.

Frenchman Panis joins Toyota from British American Racing, who have signed Briton Jenson Button from Renault.

Toyota have not named their second driver for 2003, but Brazilian Cristiano da Matta, leader of the US-based Cart championship, is favourite to take the seat.

Sauber driver Felipe Massa has also been mentioned.

McNish was handed his F1 debut by Toyota this season but has failed to score a point so far.

"In the long-term I don't have any worries that I won't be continuing at the top level," McNish said in a statement.

"But at the moment I'm obviously looking to the immediate future and preparing for Spa this weekend," he added, referring to Sunday's Belgian Grand Prix at Spa-Francorchamps.

"I am very fortunate to have been given the opportunity to drive for Panasonic Toyota Racing this year," McNish added.

"As for my first year in F1, I think I've done a solid job with strong performances, closely mirroring the efforts of my team-mate, Mika Salo, who has been driving in F1 for a few more years than me."

The Finn has picked up two points for two sixth places.

Toyota boss Ove Andersson said: "We would like to thank Mika and Allan for their hard work during the last two years, which has been integral in building the team up to its current level.

"This decision was not an easy one for the team and for Toyota Motor Corporation and in no way reflects on their clear racing ability."

McNish's contract was due to expire at the end of this season, while Toyota said they came to a "mutual agreement" with Salo.

Both drivers are likely to struggle to find a drive for next season with most teams having finalised their line-ups.

Only Jaguar, Arrows and Minardi have vacancies - and Jaguar are considered certain to sign Mark Webber in place of Eddie Irvine alongside Pedro de la Rosa, as exclusively revealed by the BBC.