Aberdeen City Council will submit the required year's notice to quit Cosla (Convention of Scottish Local Authorities) in the hope of securing "a fair share" of the Scottish budget in future, council finance convener Willie Young said.
The position was agreed by the Labour-Conservative-independent coalition administration during council budget discussions yesterday, against objections by SNP councillors.
It follows a similar notice to quit by Labour-SNP led Dumfries and Galloway Council last month.
Cosla provides a unified forum for Scotland's 32 local authorities to negotiate with the Scottish Government, but recent negotiations have resulted in Aberdeen becoming "the lowest funded council in Scotland", Mr Young said.
"We are going to give them one year's notice and I wouldn't be surprised if other local authorities are thinking exactly the same," he told the Press Association.
"We are finding now that Cosla has lost its teeth.
"That is thanks primarily to the Scottish Government, who are no longer negotiating with Cosla but are imposing things on to Cosla such as the rural schools decisions.
"It's no use us negotiating with the Scottish Government as part of Cosla when the Government says they will abide by whatever decision an independent arbiter decides, and then when they don't like that decision they use their majority to impose.
"That to me is not consultation, that is not negotiation, that is centralisation.
"The SNP are happy to say that Aberdeen being the lowest funded council out of 32 local authorities is a matter for Cosla. If that's the case, with us coming out it then becomes a matter for the Scottish Government.
"We hope that by coming out of Cosla and starting to negotiate with the Scottish Government directly, Aberdeen will get its fair share.
"We are the only council that puts more money down to Edinburgh than we receive in business rates, therefore it's only right that we get a fair share.
"If all local authorities say that Cosla is not the convention that it once was and is not the right place to do business, I think it says more about the Scottish Government than local government.
"I hope the Scottish Government take what we are saying seriously, because Dumfries & Galloway has left Cosla as well and I suspect other local authorities will follow suit, which puts the impetus squarely on (Finance Secretary) John Swinney and the Scottish Government."
A Cosla spokesman said: "This is not a surprise. Cosla as a membership organisation is governed by a set of rules. This notice to quit is a member council following our procedures which in itself is a good thing.
"The reason for it happening now is that under our rules a council has to give a full financial year's notice of its intention.
"Indeed this is why you could see more councils deciding to take a similar course of action in the coming days and weeks.
"The course of action adopted by Aberdeen and Dumfries and Galloway councils reflects their response to a proposal to review those rules.
"The reality is that Cosla is the only local government association in the United Kingdom with a 100% membership. This will continue to be the case for the rest of this financial year and all of next financial year and during this time the organisation will be doing its absolute utmost to ensure that we resolve the issues that have been raised with us, as well as representing our full 32-council membership."
A spokeswoman for Local Government Minister Derek McKay said: "We will take no lessons from a Labour Party who had eight years in power to deliver a fairer funding system for the city of Aberdeen yet failed to so.
"Despite the challenging economic climate over the three years 2012-15, an extra £7 million has been allocated to Aberdeen as a result of the funding floor formula the SNP Government has introduced that ensures Aberdeen gets a better deal than ever before.
"This Government's unwavering commitment to Aberdeen is evidenced by the delivery of a world class sports village, state-of-the-art dental school and community health facilities at Foresterhill and the ongoing construction of the £650 million Aberdeen Western Peripheral Route which will benefit the north east economy to the tune of £6 billion.
"The irony of a Labour-led council falling out with a Labour-led local government association will only reaffirm the people of Aberdeen's views that (council leader) Barney Crockett and company are completely out of their depth."