Airline flybmi has suspended flights and is filing for administration, blaming uncertainty around Brexit.
The airline, which had operated 17 regional jet aircraft on routes to 25 European cities, said all flights were cancelled from today.
The airline operates two return flights each day from Derry to Stansted, except on Saturdays when it is reduced to one flight each way.
City of Derry Airport has advised people who had booked seats on Flybmi flights not to travel to the airport as BMI is no longer operating the service "with immediate effect".
A statement on the airport's website says it has been informed that BMI regional has been placed into administration.
It adds that it is reviewing options for resuming the service with another airline as soon as possible.
The British government had just a few days ago announced an extension of public funding for the Flybmi service between City of Derry Airport and London Stansted.
It had been due to expire in May but UK Transport Secretary Chris Grayling confirmed the government would continue to subsidise the route until 2021.
He told MP's at Westminster: "The government is committed to this route because it strengthens the union, protects choice and boosts trade and travel opportunities."
Difficulties for the airline have included increases in fuel and carbon costs, as well as challenges "particularly those created by Brexit", a statement on its website said.
A total of 376 employees based in the UK, Germany, Sweden and Belgium are employed by bmi Regional.
The statement said: "It is with a heavy heart that we have made this unavoidable announcement today.
"The airline has faced several difficulties, including recent spikes in fuel and carbon costs, the latter arising from the EU's recent decision to exclude UK airlines from full participation in the Emissions Trading Scheme. These issues have undermined efforts to move the airline into profit.
"Current trading and future prospects have also been seriously affected by the uncertainty created by the Brexit process, which has led to our inability to secure valuable flying contracts in Europe and lack of confidence around bmi's ability to continue flying between destinations in Europe.
"Additionally, our situation mirrors wider difficulties in the regional airline industry which have been well documented.
"Against this background, it has become impossible for the airline's shareholders to continue their extensive programme of funding into the business.
"We sincerely regret that this course of action has become the only option open to us, but the challenges, particularly those created by Brexit, have proven to be insurmountable."
Customers have been advised to contact their payment card issuer to get a refund for flights, while those who have booked through a travel agent or partner airlines are advised to contact their agent or airline for details of their options.
British Airline Pilots' Association general secretary Brian Strutton said: "The collapse of Flybmi is devastating news for all employees.
"Regrettably Balpa had no warning or any information from the company at all.
"Our immediate steps will be to support Flybmi pilots and explore with the directors and administrators whether their jobs can be saved."