Panis will act as a test driver

But the 38-year-old Frenchman has agreed to act as a test driver for the team in 2005 and 2006.

Panis' decision to quit means world champion Michael Schumacher, at 35, will be the oldest driver on the grid.

Toyota have yet to finalise their driver line-up for next season, although Ralf Schumacher has already agreed to join them from Williams.

"My decision to retire as an F1 race driver has come after some months of deep thought, but I am proud that Toyota Racing has decided to retain my services," Panis said in a statement.

"I am looking forward to helping the team move further up the grid and I am confident that together we will reap the rewards of our combined efforts over the last two years."