Children's support villages in Otaki and Roxburgh will close after the government declined to step in and save them.
Stand, the organisation that runs the villages, has not received an increase to funding since 2009, when it faced a $5 million shortfall.
The government at the time provided $1.5m.
About $3m was needed to save the villages and Otago mayors led a campaign to secure the funding.
Stand said it would continue to provide its intensive family wraparound services in the affected areas, but the residential trauma treatment provided at the villages will end after June.
Stand is an non-governmental organisation contracted by Oranga Tamariki and the Education Ministry.
It has five other children's villages, but will now have none south of Christchurch.