The department store has been closed above New Street Station since the March lockdown was introduced.
But now the retailer says it will never reopen alongside seven of its other stores including its At Home outlet in Tamworth, Staffordshire, putting 1,300 workers at risk.
The news has been greeted with dismay from business leaders and politicians including West Midlands Mayor Andy Street who called it a "dreadful mistake".
Grand Central says John Lewis still holds a "significant" lease and officials say they want to broker fresh talks over the store's future.
The centre's owners Hammerson, which also manages the Bullring, saw its share price fall five per cent this morning following the news.
The John Lewis Partnership said the decision was made to "secure the business's long-term future and respond to customers' shopping needs".
Prior to the pandemic, the eight outlets were already "financially challenged" but customers have moved away from stores and towards shopping online faster as a result of coronavirus, it said.
The group estimated that between 60% and 70% of John Lewis sales will be made online this year and next, compared with 40% before the coronavirus crisis.
Around 1,300 of its workers, known as partners, will now enter consultations over the cuts.
The company said that, if redundancies are confirmed, "every effort" will be made to find new roles where possible across the group.
The shift towards online has seen the company double capacity at its Waitrose supermarket arm, while it also plans further investment in John Lewis's online business.
However, it stressed that John Lewis shops have a "vital role" within the business.
John Lewis Partnership chairwoman Sharon White said: "Closing a shop is always incredibly difficult and today's announcement will come as very sad news to customers and partners.
"However, we believe closures are necessary to help us secure the sustainability of the partnership - and continue to meet the needs of our customers however and wherever they want to shop.
"Redundancies are always an absolute last resort and we will do everything we can to keep as many partners as possible within our business."
Ms White added that the partnership will soon announce the results of a recent strategic review to help boost the performance of its brands.
Demise of John Lewis dream for Birmingham
The £150m Grand Central shopping centre opened to a huge fanfare in September 2015 as part of a major £600m transformation of New Street Station which its sits above.
More than 140,000 eager shoppers passed through the doors of Grand Central on its bumper first weekend.
And at the cornerstone of Grand Central is the 250,000 sq ft John Lewis which anchored the huge development in what was seen as a huge coup for the city to sit alongside its other big name department stores Selfridges, Debenhams, House of Fraser and Harvey Nicholls.
John Lewis invested £35m in the store in the mammoth centre which took over the space of the former Pallasades shopping centre.
With more than 1,000 jobs created, council chiefs said the city's newest addition John Lewis and its Grand Central home heralded a bright future.
Fast forward five years and the dream lays in tatters with the news of the store's demise coming among other empty units now inside the once-celebrated centre.
West Midlands Mayor Mr Street, who prior to his political career was managing director of John Lewis, said the news was "incredibly disappointing".
He said: "The proposed closure of John Lewis in Birmingham is incredibly disappointing news, and my thoughts are with all the partners and their families affected by their announcement.
"There is no question that the coronavirus pandemic has caused severe economic damage and uncertainty, but I still have enormous faith in Birmingham as a place to do business.
"The city is one of the top three in the whole of the UK for retail, with high footfall and many other retailers thriving in recent years.
"Against this backdrop it is extremely disappointing that John Lewis & Partners has not been able to make a success of its flagship Birmingham store.
"But my belief in potential is unwavering, and I still believe the store can not only be a great success, but also provide brilliant retail offer for the city and the wider region.
"At this stage the closure is still only a proposal, and one which I believe risks being a dreadful mistake.
"Therefore I will be making the case for why the company should not give up this tremendous opportunity in Birmingham."
Neil Rami, chief executive of the West Midlands Growth Company, said: “We’re incredibly disheartened to hear the news of the John Lewis store closure in Birmingham.
“The onset of Covid-19 has exacerbated the ongoing difficulties faced by the retail sector and the unfortunate closures of stores up and down the country.
"It is sad to see that trends in the retail market have affected our region and the survival of an iconic brand like John Lewis – an important part of our city centre fabric and visitor offer.
“We are hopeful that Birmingham’s standing as the most significant retail hub outside of London positions the region strongly through this UK-wide period of uncertainty.
“We are keen to work with John Lewis Partnership and Hammerson to ensure that all possible safeguarding measures are explored in recognition of one of our most important anchor retailers and its employment of local people."
Birmingham Ladywood MP Shabana Mahmood tweeted to call the closure "terrible news".
CBI West Midlands Regional Director Richard Butler added: "This is a huge blow and its deeply disappointing that we are losing an iconic brand from Birmingham city centre.
"This shows the depth and breadth of the economic challenge facing Birmingham and the wider West Midlands.
“The mini budget yesterday was welcome but the news about John Lewis shows the need for sustained support for our region to keep our shops open.
“We need these businesses to survive and thrive to support our region in months ahead.”
It comes amid an uncertain future for Debenhams in the Bullring as talks over its future continue after it emerged in May it has been earmarked for closure.
A spokesman for the Bullring and Grand Central, which are both managed by retail property group Hammerson, said: "We are disappointed in John Lewis & Partners’ decision not to re-open in the UK’s second city.
"They opened the store in 2015 as part of Grand Central’s £750m regeneration project and this September would have been their fifth year of trading.
"The Bullring Estate is a leading retail and leisure destination with shoppers and brands including Selfridges, which has been a draw for Birmingham for the past 17 years.
"Grand Central’s location in New Street Station attracts over 20m visitors a year as part of the busiest train station outside of London.
"We will continue our discussions with John Lewis regarding their future in Birmingham, as there remains a significant period left on the lease.
"However, the strong city centre and high footfall location of the current John Lewis space lends itself to future alternative uses, which we will explore.”
Retail crisis with post-lockdown woes
The retail bloodbath has continued apace with the news from John Lewis Partnership that it was closing eight of its stores including at Grand Central alongside job cuts as Sir Philip Green’s Topshop empire also revealed redundancy plans.
John Lewis’s new chairman Sharon White confirmed plans to shut several shops, axe one of its two offices in Victoria and cut roles.
But in a further blow to staff, the group, which also owns Waitrose, cautioned staff that their annual bonus was also likely to be scrapped next year amid a drive to boost profits.
It comes as Sir Philip’s Arcadia group also recently said it was cutting around 500 of its 2,500 head office jobs amid a restructure in the face of the coronavirus crisis.
And luxury department store Harrods is also slashing around 700 posts as the pandemic and lockdown wreaks havoc on Britain’s high street.
Upper Crust owner SSP announced up to 5,000 roles could go following plunging passengers numbers at railway stations and airports.
Today high street pharmacy chain Boots has said it expects to cut more than 4,000 jobs as part of action to mitigate the “significant impact” of Covid-19.