Electric Circus, on Market Street, had been expected to remain open for another two years while plans for a new-look Fruitmarket Gallery were developed.
But its operators say they have decided to shut down the venue at the end of this month due to the news about the expansion of the gallery.
It emerged in December that Edinburgh City Council - which owns the two buildings - had agreed a deal with both parties which would allow the gallery to realise long-held expansion plans.
At the time the gallery’s director, Fiona Bradley, described the prospect of a takeover of the Electric Circus site as “the Holy Grail”.
The Fruitmarket is planning an £11 million development which will effectively double the size of the gallery, which dates back to 1974 and underwent a previous overhaul 20 years later.
It had not been expected to start work on a new revamp until 2021 due to the time needed to commission designs, secure planning permission and raise funding.
The prospect of the sudden loss Electric Circus, one of the city’s few medium-sized venues, will send shock-waves through the live music scene in Edinburgh. Its demise has been revealed just weeks after the former Picture House on Lothian Road was turned into a Wetherspoon pub.
A statement from Electric Circus said: “It is with a very heavy heart that Electric Circus has decided to close. We would first like to say the biggest thanks to all of you; to the staff who have worked with us past and present, to all the promoters and bands we have had the pleasure of hosting over the past seven years.
“To the incredibly loyal customers; from karaoke, club & gig-goers - without you we wouldn’t be here today, you have all been a joy.
“The decision to close was not an easy one but we feel that due to the recent news regarding the eventual closure of the venue and the expansion of the Fruitmarket Gallery we feel, as a business, it is best if we go out with a bang.
Our last day of business will be Saturday 25th March and we hope that over the next few weeks we will see lots of familiar faces come down to celebrate the last days of Electric Circus.
“We will be contacting all customers that have booked with us after the closing date and a full refund of any payments made will be given.
“We thank you all again for your custom and continuous support and look forward to inviting you to one last party. More details of the last weekend will be published in due course.”