It's also disbanding its Missiles and Unmanned Airborne Systems division, spreading its work out among other Boeing units.
Boeing makes military helicopters and planes, in addition to commercial jets used by airlines. The commercial airplane business has been expanding. But the defense business is suffering because of tight government spending in the U.S. and other countries.
Boeing is reducing the number of defense executives by 30 percent from 2010 levels. Spokesman Todd Blecher said much of that has already happened, and the last 10 percent of the cuts will come by the end of the year.
Boeing reassigned several defense executives on Wednesday as part of the restructuring.
The shake-up includes disbanding the Missiles and Unmanned Airborne Systems division as of Jan. 1. That unit makes things like cruise missiles and drones that have been in high demand but which are not needed as much as the wars in Iraq and Afghanistan have wound down.
The division's work will be spread to other areas, Blecher said, for instance with missiles becoming part of Boeing Military Aircraft's "Global Strike" division. The missiles and unmanned planes unit had its own finance, communications, human resources and legal staff, but that work will be spread among other Boeing defense units, the company said.
Boeing says it has cut defense facilities by 10 percent "and is looking for more over time." It did not say which facilities will be affected. The cuts include moves like eliminating its defense plant in Wichita, Kan., which will be done by the end of next year.
Two years ago, Boeing's defense business employed 66,300 people. It's down to 60,500 now, a drop of almost 9 percent.
Blecher said some workers have gone to Boeing's commercial airplanes side. Employment there has jumped from 80,000 at the beginning of this year to 85,000 now.
At the beginning of 2011, defense and commercial airplanes each made up roughly half of Boeing's business. But defense has stagnated, with revenue rising just 3 percent during the first nine months of this year, and margins turning negative, while commercial airplane growth has taken off as deliveries accelerate.
Dennis Muilenburg, the president and CEO of Boeing's defense business, said in a statement, "While funding for the U.S. Department of Defense is under extreme pressure, we're innovating and expanding our core, in the U.S. and around the globe, to sustain and grow our business."
Shares of Chicago-based Boeing Co. fell $1.31 to $70.27 in afternoon trading on a day when Wall Street was down sharply.