The Arts Council had been providing £520,000 a year towards The Public
Arts Council officials have confirmed they will be pulling their funding for a controversial arts complex.
The Public, in West Bromwich, has seen its annual costs double since it partially opened last June - two years late and nearly £15m over budget.
Its main feature, an interactive gallery, has still not opened.
In a statement, the Arts Council said it was unable to give the extra £500,000 a year Sandwell Council said was needed to keep The Public running.
However, it said it would be giving the council a one-off £3m grant to try to open the whole arts complex to the public.
The Arts Council added the decision to withdraw the annual funding had not been "taken lightly".
The Arts Council has previously provided £520,000 a year.
However, Sandwell Council had said that the annual budget needed to rise to £1m to keep the complex running.
The council's cabinet has already agreed to find an extra £1m of funding over the next year to help the project.
Sir Christopher Frayling, chairman of Arts Council England, said: "The fact is that, although the building is open, the interactive art gallery at the centre of the vision for The Public is not.
"We have done everything we can but there comes a point where we have to make a difficult judgement - and regretfully, that moment is now."
The Public went into administration in 2006, when it was being run by a private company, before effectively being saved by a £1.6m grant.
It opened last year and attracted criticism over plans to charge people £6.95 to enter the interactive gallery, although it has yet to introduce the charges.
Its facilities include performance spaces, a recording studio, offices and a cafe.
The complex, which cost about £60m to build, was designed by architect Will Alsopp.
The Arts Council has contributed about £30m to the project in total while Sandwell Council has paid £18m.
The regional development agency Advantage West Midlands and the European Union have also provided funds.
The Arts Council had concerns over low visitor numbers