Councillors have recommended spending £120,000 to bail out their school meals service, which is in debt as more pupils reject healthier lunch options.
More than half of primary pupils no longer eat school meals
Denbighshire Council is also to set up a working group to look into ways of increasing pupils' take-up of meals.
Servings are 100,000 down on last year although demand rises by 40% on days fast food is served in primary schools.
Meanwhile, BBC Wales found 12 of Wales' 22 councils have seen a fall in the number of pupils eating school dinners.
Denbighshire councillors have also been recommended to spend another £70,000 to create a new cashless payment system in school canteens.
At a meeting on Thursday, councillors were told in a report that Denbighshire's school meals service was no longer financially viable.
Rising costs for fresh vegetables and fish also added to pressures and the local authority's catering service was more than £81,000 in the red last year.
Roughly one in seven of Denbighshire's primary school children have given up school meals in the past three years and the take-up rate is now about 48%, councillors were told.
Three years ago, the council allocated a £74,000 subsidy to the catering service after it recorded losses of £20,000.
But the subsidy was later reduced and financial situation has worsened with the service ending up more than £81,000 in the red last year.
Denbighshire's lifelong learning scrutiny committee has also agreed to set up a working group.
It will take an in-depth look over the next three months at how to encourage more pupils to eat school lunches.
There was a similar pattern in more than half of other Welsh councils asked by BBC Wales about demand for school lunches.
Primary schools in Pembrokeshire have seen uptake of schools meals fall from 44% to 39% of pupils, while in Newport numbers had fallen by 2.75% over the last six months.