He said Tesla's rapid growth in recent years contributed to the duplication of roles and creation of jobs that the company could no longer justify. Year-to-date, Tesla's headcount is up roughly 15%.
Tesla said it began notifying impacted workers on Tuesday and would continue to do so throughout the week.
It's not the first time Tesla has laid off workers.
In October, Tesla fired "hundreds of workers" following annual performance reviews.
"These cuts were nearly entirely made from our salaried population and no production associates were included, so this will not affect our ability to reach Model 3 production targets in the coming months", Musk tweeted.
The front hood logo on a 2018 Tesla Model 3 electric vehicle. "What drives us is our mission to accelerate the world's transition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable".
The company is making the move now so it never has to do it again, he wrote.
Shares in the company rose as much as 7 percent on Tuesday, although they fell back to stand just 3 percent higher on the day after Musk's announcement.
Tesla shares pared an earlier gain of as much as 6.9 per cent and were up 3.2 per cent to US$342.81 as of 2:21 p.m.in NY trading. The company would also end its residential sales agreement with Home Depot to sell more solar panels and battery storage in Tesla stores and online.
Consumer Edge Research Analyst James Albertine wrote in a note to investors that he views the moves "as a positive in helping Tesla track toward profitability later this year".
"These cuts were entirely from our salaried population and no production associates were included, so this will not affect our ability to reach Model 3 production targets in the coming months". The company is now producing just under 3,000 per week, Bloomberg estimates.