TVNZ7 is being replaced with a duplicate of TV1 running shows an hour later, much like TV3's 'Plus 1' channel.
It will begin airing on the same frequency as TVNZ7 on July 1.
Spokesperson for TVNZ Megan Richards said the decision is a result of the Government's expectation that TVNZ deliver a 9 percent return on investment, which was impossible to do whilst funding a public service channel.
"The rationale for this boiled down to some fairly basic facts of life for us," says Ms Richards.
"As a commercial broadcaster we need to make a profit, or at least not make a loss. The Government expects us to make a 9 per cent return on investment and that's got to be the primary driver, so investing $15 million in a channel that provides no return is not an option that was available to us."
Labour's Clare Curran says she is "fiercely trying to keep it going".
Nielsen surveys show more than 1.4 million Kiwis tune in to TVNZ7 a month.
source: newshub archive