Formula 1 has been thrown into chaos after eight of its major teams said they are now planning to set up a rival championship for the 2010 season.
The threat by members of the F1 Teams Association (Fota) intensifies their row with world motorsport boss Max Mosley over his budget cap proposals.
"The teams have declined to alter their original conditional entries to the 2010 F1 Championship," said the teams.
"We've no alternative than to commence preparation for a new championship."
Mosley was insistent on introducing a voluntary £40m budget cap for teams to curtail a "financial arms race" in F1.
But Fota refused to agree to his conditions, prompting championship leader Brawn GP, Ferrari, McLaren, Renault, Toyota, BMW Sauber, Red Bull Racing and Toro Rosso to take their drastic action.
They announced their decision following a four-hour meeting on Thursday night ahead of this weekend's British Grand Prix at Silverstone.
"Since the formation of Fota last September the teams have worked together and sought to engage the FIA and commercial rights holder (Bernie Ecclestone), to develop and improve the sport," read a Fota statement.
"Unprecedented worldwide financial turmoil has inevitably placed great challenges before the F1 community.
"Fota is proud that it has achieved the most substantial measures to reduce costs in the history of our sport.
"In particular, the manufacturer teams have provided assistance to the independent teams, a number of which would probably not be in the sport today without the Fota initiatives.
"The Fota teams have further agreed upon a substantial voluntary cost reduction that provides a sustainable model for the future.
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"Following these efforts, all the teams have confirmed to the FIA and the commercial rights holder that they are willing to commit until the end of 2012.
"The FIA and the commercial rights holder have campaigned to divide Fota.
"The wishes of the majority of the teams are ignored. Furthermore, tens of millions of dollars have been withheld from many teams by the commercial rights holder, going back as far as 2006.
"Despite this, and the uncompromising environment, Fota has genuinely sought compromise.
"It has become clear, however, the teams cannot continue to compromise on the fundamental values of the sport and have declined to alter their original conditional entries to the 2010 world championship."
Fota added that its championship would put F1 fans first and boast the best drivers and sponsors.
"This series will have transparent governance, one set of regulations, encourage more entrants and listen to the wishes of the fans, including offering lower prices for spectators worldwide, partners and other important stakeholders," added the statement.
"The major drivers, stars, brands, sponsors, promoters and companies historically associated with the highest level of motorsport will all feature in this new series."
Former champions Williams and Force India have already committed unconditionally to the FIA's world championship along with three new entrants - Campos, US F1 and Manor.
The FIA has said there are other would-be newcomers waiting to take the places of those teams that refused to enter unconditionally, although one, Lola, has already withdrawn its application.
The stage is also set for a legal battle, with the FIA saying champions Ferrari and the two Red Bull teams have existing contracts which commit them to the existing championship.
The FIA had set a 19 June deadline for five teams - Brawn, BMW-Sauber, McLaren, Renault and Toyota - to convert their provisional entries into unconditional ones or risk being excluded.
The FIA responded to the teams' move in a statement on Friday, saying: "We are disappointed but not surprised by Fota's inability to reach a compromise in the best interests of the sport."
It claimed that "elements within Fota have sought this outcome throughout the prolonged period of negotiation and have not engaged in the discussions in good faith."
The statement added: "The deadline for unconditional entries to the 2010 FIA Formula 1 World Championship will expire on Friday evening. The 2010 entry list will be announced on Saturday."
BBC F1 pundit and former team boss Eddie Jordan said it might ultimately need Mosley to announce he is not seeking another term of office to resolve F1's civil war.
He told Radio 5 Live: "It's posturing, but it has become very serious, and heads will roll before this sorts itself out."
Jordan added there was "absolutely not a chance" that the sport could sustain two rival series next season.
The BBC, which broadcasts F1 in the UK, said in a statement: "We are monitoring the situation."
It added: "We never comment on the details of contracts, because it is commercially confidential information."
If this F1 civil war continues and all the big guns form a breakaway series. F1 will be full of "amatuer" drivers and small teams. It will no longer be attractive. Which would be more interesting? Force India fighting for the lead or Ferrari fighting for the lead? F1 will no longer be interesting. All the planing and preparation will be for naught as no one will watch it.