The Capital-based Scottish Civic Forum will receive no future grants from the Scottish Executive.
The decision today prompted anger from politicians and community leaders, including the Episcopalian Bishop of Edinburgh, the Rt Rev Brian Smith.
He said: "Building a new democracy is not just about commissioning Parliament buildings but also about encouraging new ways of engaging the citizen. The forum has been doing that and in the current climate of cynicism we cannot afford to dispense with any body offering solutions to voter disengagement."
The SCF was intended to act as a "gateway" between the government, civic organisations and society.