Magners League side Border Reivers will be disbanded at the end of the season as part of the Scottish Rugby Union's wide-ranging review.
Border Reivers have been dumped by the Scottish Rugby Union
The SRU board has decided it was unrealistic to continue running three professional teams.
Chairman Allan Munro said: "The decision has not been an easy one.
"But we believe the Reivers' closure and strengthening Glasgow Warriors will go some way to improving high-performance rugby in Scotland."
The governing body stated that the Glasgow club would receive extra funding as a result of the Reivers' closure.
Several Borders players will be transferred to the Warriors for next season but a number have been told to find new clubs as part of the cost-cutting process.
Munro said: "We recognise the contribution our Borders players and coaches have made and their real determination to succeed against the odds."
But he stressed: "It was quite clear that we could not continue as we were and something had to be done if we were to maintain and improve professional rugby in Scotland."
Edinburgh, Scotland's privately-owned pro team, had gone public 24 hours earlier to criticise the latest review - and Scottish Rugby.
A statement warned against reducing the number of professional teams in Scotland - and accused the SRU of a lack of consultation.
By expressing a commitment to long-term professional rugby in Scotland we can give Glasgow the ability to compete at the highest level
Reivers have struggled to hold their own against Irish and Welsh sides in the Magners League and have failed to capture the imagination of the Borders public and attract viable crowds to Netherdale.
The SRU, which has debts of more than £23m, said it would spend the money saved from binning the Reivers on enabling Glasgow to compete with the top sides in Europe.
SRU chief executive Gordon McKie said: "By expressing a commitment to long-term professional rugby in Scotland we can give Glasgow the ability to compete at the highest level.
"Hopefully the team will now be able to compete in the Magners League and the Heineken Cup, which will in turn galvanise the pro game in Scotland."
While the Warriors have avoided the chop, McKie revealed the team were likely to be moved away from their current Hughenden base in the west end of Glasgow.
"If we were starting this journey now then we would put a professional team in a proper stadium," he said.
"It would be seated, covered, atmospheric, have a capacity of 6,000-10,000, and the players would have proper playing and training facilities.
"It would be located next to a large population with good infrastructure, meaning good access and plenty of businesses nearby which wish to become involved and sponsor that team.
"For all of those reasons the board has taken the decision that the team should be located either in Glasgow, the west of Scotland, or the central belt."
A number of players have announced in recent weeks that they are departing Reivers, Glasgow and Edinburgh having signed contracts with English, French and Irish clubs.