The Royal Over-Seas League at 100 Princes Street shut on a temporary basis at the end of January to allow a full assessment of the condition of the building.
But now members have been told it will not reopen and the property will be put up for sale.
There was said to be “dismay” at the meeting of around 50 members when officials broke the news.
An online announcement by the league, which also has a clubhouse in central London, said: “Following the conclusion of building investigations over the last few months, it is with great sadness we must announce ROSL’s Edinburgh Clubhouse will not reopen and will be sold.”
It said repairs to the building had been estimated at £2 million and refurbishment at a further £3.5m, including replacement of windows, boilers and ventilation, fire alarm and sprinkler systems and rewiring. “Setting this against a valuation of the building of £1.5m means that ROSL has no choice but to sell the building and realise what value it can.”
The league’s activities include cultural, social and humanitarian events and it boasts a membership of 16,000 around the world.
The club has had its base at “Over-Seas House” in Princes Street since 1930. Membership cost around £277 per year.
It offered a club room, restaurant, bar, conference space and 20 en-suite rooms, as well as a viewing platform on the roof with unrestricted views of the Castle.
One recent member said: “It’s terribly sad. We loved it. Edinburgh is losing a lovely club, so well placed and very friendly. It’s a real disappointment.”
Members have been given temporary membership at the Royal Scots Club in Abercromby Place until December.
But the ex-member said: “We’ve been to the Royal Scots Club and it wasn’t for us. It’s a different sort of place. Nobody liked it.
“The beauty of the ROSL was it was so central and people could get buses to it. And the people who went there were very varied. The Royal Scots Club is a totally different clientele. It’s very military – a totally different atmosphere.”
She said she hoped the club might yet find new premises elsewhere in the city to replace Princes Street, but stressed it would have to be easy to get to.
As to the future of the property, an industry insider said the small number of rooms meant it was more suited to be run converted to serviced apartments rather than a hotel. He said the condition of the building would bring down the price, but not deter investment in such a prime site.