The charred remains of the listed building will be taken down as soon as possible, Fife Council has confirmed.
The decision comes just days after a blaze destroyed much of the 17th-century building, which had been left boarded up and derelict for several years despite approval to turn it into flats.
Lundin Links’ main road remains closed to traffic as the clear-up operation continues.
Fife Council, which had to step in to board up the building and secure the site after previous fires, confirmed the structure would now be demolished as soon as possible.
The hotel was owned by Kapital Residential, which is now in the hands of liquidators.
It was all but destroyed in last Thursday’s devastating blaze, which saw fire crews remain on the scene well into the following day.
The council said it would be demolished on public safety grounds.
Ken Gourlay, executive director of enterprise and environment, said “Plans are under way to safely demolish the building as soon as possible following the fire at the weekend.
“The safety of the public is our first priority and road diversions will continue until it is safe to remove them.”
The developer and liquidator have both been informed of the plans.
Councillor Colin Davidson, who represents the town, said: “Our planners, building control, roads and legal team have all been working flat out since Friday on this issue.
“What I can say is agreement has been reached with the government department dealing with listed buildings to demolish the building and the current owners have been informed of the need for this to happen ASAP.
“In addition the police will continue to be monitoring traffic using the diversion route to ensure its being fully complied with.”
Diversions are likely to remain in place for some time given the hotel’s proximity to the min road.
All businesses remain open. Police are monitoring the arrangements to make sure motorists comply.
Traffic lights at the bridge will also be manned at key times to ensure pupils can get on school buses in safety.