The Aulnay plant will cease production sometime during 2014, leaving 3,000 people without jobs. The plant closure will be France's first in the automotive sector in two decades, according to Reuters.
PSA will eliminate another 3,600 non-assembly jobs company-wide.
"I am fully aware of the seriousness of today's announcements," Chief Executive Philippe Varin said in a statement. "The depth and persistence of the crisis impacting our business in Europe have now made this reorganization project indispensable."
PSA has been hit hard by the European debt crisis, particularly in the southern part of the region. The company recently announced it was burning $244 million per month and that it wouldn't return to the black until 2015.
Peugeot posted a $857.5 million loss during the first six months of the year.
