Lego is slashing 1,400 jobs as part of a company-wide overhaul meant to counter falling sales.
The move will effectively cut 8% of the Danish toymaker's 18,200-strong workforce, the majority of whom will be let go by the end of the year.
The company said it was part of a "reset" for the group, which has become "increasingly complex" over the past five years, making it harder for Lego to grow.
Lego Group chairman Jorgen Vig Knudstorp said: "We are very sorry to make changes which may interfere with the lives of many of our colleagues.
"Our colleagues put so much passion into their work every day and we are deeply grateful for that. Unfortunately, it is essential for us to make these tough decisions."
Affected staff will be offered redundancy packages and support as they move into new jobs outside Lego, the company said.
The toymaker made the announcement alongside its half-year results, which revealed a 5% drop in revenue to 14.9 billion Danish krone (€2bn).
It came as a double-digit sales jump in growing markets like China failed to compensate for declining sales in established markets including the US and Europe.
Pre-tax profit dropped nearly 3% to 4.4 billion Danish krone (€591m).
Mr Vig Knudstorp said the group was taking action.
"We are disappointed by the decline in revenue in our established markets, and we have taken steps to address this.
"We are working closely with our partners and we are confident that we have the long-term potential of reaching more children in our well-established markets in Europe and the United States.
"We also see strong growth opportunities in growing markets such as China."
Lego said some of its best-performing toys for the period included Lego City, Lego Friends and Lego Technic, as well as products linked to the hit Lego Batman film.