Wolverhampton Council said The Slade Rooms on Broad Street, which has been shut since early last year, was not able to reopen due to "operational issues".
The authority is understood to be considering whether to renew its lease on the 500-capacity venue, which it took over in 2010 to replace the Little Civic.
Sources have told the Express & Star that any renewal is "highly unlikely", with the site considered surplus to requirements once the long-delayed budget-busting revamp of the Civic halls on North Street is complete next year.
Over the years The Slade Rooms has been used for more intimate gigs and has hosted the city's literature festival. It has put on shows by bands including Embrace, Pop Will Eat Itself, Buzzcocks, Morbid Angel, Spacement Apes and The Bluetones.
Currently booked events and recent performances have been rescheduled to other venues, including Pete Doherty's show last Sunday which was moved to KK's Steel Mill.
Councillor Steve Evans, Wolverhampton Council's cabinet member for events, said: "The Slade Rooms has been closed since the pandemic started and due to a number of ongoing operational issues, it is not currently possible to reopen the venue while we review future options.
"The city is well-served by a number of other small-sized venues such as Bilston Town Hall, Newhampton Arts Centre, Lighthouse, Arena Theatre, The Robin and we are working to reschedule acts that were due to play at the Slade Rooms to alternative sites.
"Wolverhampton is once again becoming an events city as we emerge from the pandemic and fans of amazing music and other live performances can look forward to the reopening of the iconic Civic and Wulfrun Halls next year along with a thriving grassroots scene in the city."
It is not yet known whether The Slade Rooms will reopen if new tenants are found.
Upcoming events still listed at the venue include Dusk Brothers on October 16 and Lucy Spraggan on December 9.
Shaun Keasey, who runs the nearby Prince Albert pub and Gorgeous nightclub, and is chair of the city's Pub Watch, said: "It is very disappointing for the city centre to lose a venue, but it hasn't been open for ages.
"Maybe someone new will come in and make a better job of it?"
The Civic halls is due to finally open in 2022 having been closed for seven years. It will be managed by AEG Presents.