The order of nuns that runs Cregg House, a centre for people with intellectual disabilities in Sligo, has announced it will no longer operate the service.
Gregg House's Wisdom Services has claimed that the Health Service Executive had underfunded the centre by €1.3m.
The HSE has said that the cut in funding was in line with reductions to similar services in the region and that it did not have the funds to deal with the deficit.
200 people use the services of Cregg House.
Since the end of April, Cregg House's Wisdom Services and the HSE have been holding talks.
Tonight a statement has been issued by Cregg House saying that "it has been a most difficult decision, as we fully understand the impact it may have on those who use our services and their families."
It continued, "also we understand the impact the decision will have on our staff and the many people who have voluntarily assisted us over the years."
Cregg House's Wisdom Services has said that it is not in a position to meet the financial shortfall.
It says that it "participated in a joint exercise with the HSE, which has drawn up proposals to modernise the services for people with intellectual disabilities in Sligo and Leitrim."
