Creative New Zealand is to end a three-year funding arrangement for Downstage Theatre in Wellington.
The agency will end its contribution of $500,000 a year by July 2009.
It says the decision relates to concerns the theatre is failing to draw audiences.
It has indicated Downstage can apply for annual funding after June.
However, theatre critic John Smythe says Downstage is currently in good health, with the last couple of shows attracting good audiences.
Downstage was founded 44 years ago.
