Campbeltown Picture House, which celebrated its centenary last year and also received £51,000 from the Heritage Lottery Fund as part of a refurbishment, is to shut on August 27.
The cinema's trading business The Picture House, Campbeltown will be placed into voluntary liquidation while the parent organisation, Campbeltown Community Business, which owns all of the cinema's assets, will remain intact. Its operators say the move will allow the community-run enterprise to be commercially viable in the short term.
The Picture House is in need of substantial improvement before it can become a sustainable modern cinema.
Volunteers who run the board will now aim to secure £3 million needed to redevelop the facilities and create a modernised and refurbished cinema. It currently employs two full-time and five part-time staff who will be helped to find new work.
Jane Mayo, chairman of Campbeltown Community Business [CCB] said: "Having fought long and hard to secure the future of the Picture House, with regret we have been left with no option other than to cease trading in our current form for the short-term future."
Ms Mayo said recent live streaming events of concerts by violinist Andre Rieu, Monty Python and live theatre from Mull had been a success and she thanked all of the Picture House's supporters and staff.>
She added: "CCB will continue to fund raise to reach our development target of £3 million in funding, which will see The Picture House re-open in 2016 with a brand new second screen, a new foyer and cafe bar."