No trace of the Beijing-bound aircraft has been found since it disappeared on 8 March 2014.
Officials say that the recovery operation is ongoing but that the 239 people onboard are now presumed dead.
The plane’s whereabouts are still unknown despite a massive international search in the southern Indian Ocean.
The declaration on Thursday should allow compensation payments to relatives of the victims.
Malaysian officials added that the recovery of the missing aircraft remained a priority and that they had pursued “every credible lead”.
Department of Civil Aviation (DCA) Director-General Azharuddin Abdul Rahman said that it was “with the heaviest heart and deepest sorrow that we officially declare Malaysia Airlines Flight MH370 an accident.”
“All 239 of the passengers and crew onboard MH370 are presumed to have lost their lives,” he said.
Following Thursday’s announcement, China’s foreign ministry called for compensation for the victims’ families.
“We call on the Malaysian side to honour the promise made when they declared the flight to have been lost and earnestly fulfil their compensation responsibilities,” spokeswoman Hua Chunying said in a statement.
The majority of the passengers on MH370 were Chinese.
Malaysia airlines said they would be contacting the families to proceed with the compensation process.
But in China, some family members refused to accept the official position that the plane was lost.
“They have found nothing,” said Li Jingxin whose brother is missing.
“With nothing found, how can they make any announcement?”
He told the Associated Press news agency that his family would not accept compensation from the airline at this time.
Four vessels are currently searching the seafloor with specialised sonar technology in a remote stretch of ocean where the plane is believed to have ended its flight.
Mr Azharuddin added that Malaysia, China and Australia have spared no expense in the hunt for the plane.
Based on analysis of satellite and aircraft performance data, MH370 is thought to be in seas far west of the Australian city of Perth.
The vessels have so far searched an area of over 18,000km sq (11,185sq miles), according to officials.
The search area involved also has known depths of up to 6,000m (19,685ft).
Mr Azharuddin said that the progress of the safety investigation into the accident would be released soon, but that “at this juncture, there is no evidence to substantiate any speculations as to the cause of the accident”.
The DCA said on Wednesday said that it planned to release an interim report on the investigation on 7 March, a day before the first anniversary of the disappearance.
Analysis: Richard Westcott, BBC News, transport correspondent
You might reasonably assume that by declaring the MH370 disappearance an “accident”, the Malaysians are ruling out any kind of foul play.
Unfortunately, they are doing nothing of the sort. This is a legal move, we are told, to help the families claim compensation.
This means we are no closer to finding out where the plane is or how it got there.
Some of the families are angry at today’s declaration. They do not want a pay-out, because they fear it will give the Malaysians an excuse to give up the search.
Recently, I spoke to two, very experienced pilots about flight MH370. One is convinced someone on board crashed the aircraft on purpose. The other is convinced it was an accident.
That sums it up really. We are coming up to a year now. And we are no closer to getting any answers.
You can only imagine what it must be like for the families.
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