The first American motorcycle manufacturer to enter World Superbikes was showing great improvement in 2015 after their poor showing in 2014.
It was due to a reorganisation of the team, which saw Larry Pegram come in as team manager/rider and former MotoGP contender Niccolo Canepa lead riding duties.
However, the news that Erik Buell Racing had filed for bankruptcy earlier this month put the team's WSBK presence in peril.
Hero, EBR's parent company, were meant to help with the remainder of the season but the Indian conglomerate has now decided to reprioritise its efforts, leading to its withdrawal.
"This is a really hard pill for us all at Pegram Racing to swallow, as we always live by the philosophy of Never Give Up" Pegram said. "The whole team did an amazing job of improving results from last year and giving some pride back to EBR and Hero.
"Niccolo Canepa was riding like the Champion he is, he was literally making peoples jaw drop at what he was doing with our motorcycle. I am so proud of the job he did. One thing for sure Pegram Racing will be back and it will be sooner than you think."
"We have worked closely with them and not only appreciate how amazing it was to have a true American Superbike to ride, but how intensely hard that small group of employees at EBR worked to build the EBR bikes, and also support our racing program and other racers. We are hoping they too will return soon. They deserve to continue," he added.