The Red, White and Blue pub, in Featherstone, was hit with the prohibition notice after officers visited the site following a tip-off.
Police found several people inside and issued two people with a £200 fine for breaching the national lockdown rules.
Now South Staffordshire Council has served the premises with a prohibition notice – banning it from opening, in line with virus rules.
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Councillor Roger Lees, cabinet member for planning and regulatory services, said: "South Staffordshire has the highest level of Covid-19 cases in Staffordshire.
"It is essential that all businesses comply with the rules set by Government and we will not hesitate to take action against any business that fails to comply with the current restrictions.
"I want to thank all those businesses who are, and continue, to comply with the rules."
Failure to comply with the notice can result in a fine of up to £10,000, council chiefs have said.
Sergeant Kelly Wareing, from Staffordshire Police, said: "Police officers and environmental health officers continue to monitor activity in businesses across the district for Covid breaches and we are responding and acting on complaints from members of the public about businesses that are flouting the rules.
"Most businesses are taking their responsibilities seriously and complying with the regulations but for those businesses that think they are above the law, we will not hesitate to use the powers that are available to the police and environmental health and public health teams."
Anyone who has any concerns about businesses they think are not following the current national restrictions can report it to the police by calling 101.