It acknowledged that five reviews since 1991 had failed to make inroads into horse fatalities and injuries from the sport.
"This has been an extremely tough decision for the Board," Racing Victoria chairman Michael Duffy said.
Victoria's RSPCA, a long and vocal critic of jumps racing, expressed its delight at the decision.
"This is a major win for jumps racing horses and a major win for animal welfare," the RSPCA said in a statement.
"The RSPCA has campaigned for more than 30 years to abolish hurdle and steeple events. "Over the past decade, the RSPCA has placed increased pressure on Racing Victoria and the Minister of Racing to ban jumps racing, resulting in season suspensions and subsequent reviews.
"Unfortunately, while there have been numerous reviews over the past decade, no changes to jumps racing have stopped the fatalities or injuries.
"Although the season was temporarily suspended in 2009, sadly Racing Victoria bowed to industry pressure and allowed jumps racing to continue."
The RSPCA said while it was disappointed the 2010 season would still go ahead, it welcomed Racing Victoria's decision on the sport and commended the board for "taking leadership of the issue".
Animals Australia also welcomed the decision, but said it feared more horses will fall and die before the curtain finally closes after the 2010 jumps season.
Executive director Glenys Oogjes said the Racing Victoria board had judged that the high death toll and injury rate in jumps racing was unacceptable to the community.
"Australians care about horses, and the tragedy of seeing the 'green screen' come up 10 times on the racetrack this year understandably caused outrage. No animal should suffer and die for the sake of 'sport'.
"We are disappointed that jumps races will be conducted in 2010 in Victoria. The 2008 season saw 12 horses die and another 10 died or were put down on the track due to their injuries this year. Another season in Victoria will put several hundred jumps horses at further unnecessary risk," Oogjes said.
Oogjes speculated that the decision may ultimately mean the end to all jumps racing in Australia.
Victoria and South Australia are the only two remaining states with jumps racing and South Australian jumps races rely largely on Victorian horses and jockeys.
"Animals Australia now calls on the South Australian racing authorities to move quickly to impose a similar ban on jumps racing in that state," Oogjes said.
Racing Victoria's Duffy said that jumps racing had been an important contributor to the history and evolution of thoroughbred racing in Victoria for many years.
He said the board had been duty bound to act in the best interests of the long-term sustainability of Victorian thoroughbred racing and to protect the industry's image and reputation within the broader community.
"After careful consideration, it is the board's view that there is an inevitability about the long-term future of jumps racing and consequently, it is in the interests of all to provide some certainty and an appropriate transition to a Victorian racing industry without jumps racing."
Duffy noted that reviews undertaken in 1991, 1994, 1998, 2002, 2005 and 2008 had failed to resolve the rate of fatalities and injuries.
"Despite the implementation of all of the safety recommendations of the Jones Report conducted in 2008, the incidence of falls and fatalities has continued to increase.
"The recommendations of six previous reviews had been implemented without any sustained reduction in incident rates.
Duffy said a programme of highweight races would be scheduled for the 2011 season to help with the transition for jockeys, trainers and horses.
The board has also committed $A1 million to a transition and marketing fund to ensure the famous Warrnambool May Carnival maintains its position as one of Australia's most popular and successful regional racing events.
"Over the coming months [we] will be working closely with the participants and clubs impacted by the decision to ensure an effective and smooth transition.
"The safety of riders and horses in all forms of racing is of paramount importance and we will continue to do whatever is reasonably practicable to make jumps racing less hazardous during its final year in 2010," Duffy said.
He said in making the decision, the board had undertaken an internal review of the 2009 season which examined the current state of jumps racing. It had also looked at a five-year trend analysis of key data and had taken into consideration submissions from various parties, including the Australian Jumps Racing Association.