The YJB said there were too few occupied places to justify funding
The chief prisons inspector has criticised the closure of a unit for teenage offenders which inspectors found was a "beacon of good practice".
Anne Owers said axing the under-18s unit at Thorn Cross in Cheshire was a "retrograde" move.
The Young Offender Institution has been praised in the past for innovative work in tackling offending and reintegrating young criminals into society.
The Youth Justice Board said the move was for financial and policy reasons.
Thorn Cross, a purpose-built open institution, included a specialist juvenile unit with places for up to 60 boys.
In a last report into the unit, Ms Owers said it had not only passed key tests set by the watchdog - it was in fact improving further.
Far fewer teens held at Thorn Cross felt unsafe compared with other establishments and inspectors praised its anti-bullying strategy, she said.
The inspection said those held at Thorn Cross had opportunities for training and education and the strategies to re-introduce youngsters into the community were well-run.
"This inspection showed that the Thorn Cross juvenile unit was a beacon of good practice in working with a small number of young people and preparing them for the transition to life outside prison," said Ms Owers.
"This is a model that should be built on, not abandoned."
Describing the report as an obituary, Ms Owers said the centre had provided offenders with chances of education and training which had not existed on the outside.
A 2002 academic study of a separate specialist unit at Thorn Cross concluded that every £1 spent on intensive management of young offenders saved society a further £5 because fewer crimes were being committed on release.
A spokesman for the Youth Justice Board, responsible for placing young offenders at the centre, said the decision to withdraw funding from the unit was taken for financial and policy reasons.
"For the past few years, only a third of the places have been filled by under-18s on a regular basis," said the spokesman.
"The YJB's view is that a large single mixed adult/young person open unit is not viable, runs counter to the principle of creating links with the young person's home community, and was part of the reason that Thorn Cross struggled to fill available places.
"Continuing to purchase places at Thorn Cross represented relatively poor value for money."
She said the YJB remained "committed" to open conditions and was considering a number of pilots across the country, said the spokesman.
But in her report, Ms Owers attacked the decision to close before pilots were launched.
"To close Thorn Cross before there are any concrete plans for alternative open units, and largely for immediate financial reasons, is both disappointing and retrograde."
Phil Wheatley, head of the National Offender Management Service, said the unit's role had now changed to focus on those aged 21-25.
"The change means that the excellent services provided by the unit are preparing more young people to lead law-abiding lives when they leave prison," said Mr Wheatley.