A C-2A "Greyhound" aircraft with 11 people on board went down Wednesday afternoon around 930 kilometres southeast of Okinawa. Eight sailors were rescued shortly after the accident.
All eight "are in good condition at this time," the navy said in a statement.
The decision to abandon the search and rescue comes after two days of operations involving seven ships from the US Navy and Japan's Maritime Self-Defence Force, three helicopter squadrons and maritime patrol aircraft.
"Our thoughts and prayers are with our lost shipmates and their families," said the statement.
The plane was on a routine transport flight, carrying passengers and cargo from Marine Corps Air Station Iwakuni in southern Japan to the USS Ronald Reagan.
The C-2A is a re-supply workhorse for US aircraft carriers, routinely ferrying cargo, mail and people onto and off the globally deployed vessels.
US authorities initially told Japan on Wednesday that engine trouble was the suspected cause of the accident. The Navy says it has launched an investigation.
In August, the destroyer USS John S. McCain collided with a tanker off Singapore, killing 10 sailors and injuring five others.
Two months earlier, another destroyer, the USS Fitzgerald, and a cargo ship smashed into each other off Japan, leaving seven sailors dead.
There were also two other, lesser-known incidents. In January, the USS Antietam ran aground near its base in Japan, and in May, the USS Lake Champlain collided with a South Korean fishing vessel.
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