The DfT will appoint its Operator of Last Resort to take over delivery of passenger services on the TPE network from 28 May 2023 when the existing agreement expires. The DfT’s decision regarding the TPE National Rail Contract extension relates only to TPE and the Group’s other rail businesses are not affected.
The government will now run the rail service, which covers the North of England and parts of Scotland.
There had been calls for its contract to be removed after poor levels of service over the past year.
Around one in six of its services were cancelled in March which was the highest rate in the UK.
The Department for Transport has confirmed that TransPennine's contract would not be renewed on 28 May.
It will now be run by an "Operator of Last Resort" which means a business will step in on behalf of the government to take over the management of the service.
Transport Secretary Mark Harper said: "After months of commuters and Northern businesses bearing the brunt of continuous cancellations, I've made the decision to bring Transpennine Express into Operator of Last Resort."
Transpennine - which is run by FirstGroup - has stood out for the number of trains it has cancelled the night before they are due to run, because of staff shortages.
The company has said a recovery plan was bringing the cancellation numbers down.
It has previously blamed high staff sickness, a backlog of driver training and the lack of an overtime working agreement with the drivers' union Aslef.
Transport Secretary Mr Harper said taking the TransPennine Express under state control was "not a silver bullet and will not instantaneously fix a number of challenges being faced".
He blamed strikes by Aslef for hampering a full service being offered on TransPennine Express routes.
FirstGroup, which owns TransPennine Express, said it was "disappointed" by the government's decision to not renew the contract it has run in various guises since 2004.
Graham Sutherland, FirstGroup's chief executive, said: "Our team have worked extremely hard to improve services, including by recruiting and training more drivers than ever before."
He added: "Today's decision does not alter our belief in the important role of private rail operators in the delivery of vital, environmentally-friendly transport for customers and communities across the UK."
Recent data showed that the cancellation rate on TransPennine Express hit 17% in March, including trains that were axed the night before because of staff shortages.
Profits were slashed at Transpennine Express during its latest financial year despite the train operator receiving almost £260m from the government.
Accounts with Companies House showed the firm's pre-tax profits slumped from £72.1m to £8m in the 12 months to March 31, 2022.
Transpennine Express received a revenue subsidy from the Department for Transport of £259.3m, down from £325m.
The operator said the decrease in its overall turnover from £437.7m to £420.9m due to the prior year's total including exceptional income of £59.9m.