National Theatre Wales was established in 2009 and had received Arts Council Wales funding since then.
Early successes include the groundbreaking Passion play in Port Talbot with Michael Sheen in 2011, which lasted three days and attracted 25,000 spectators.
In a letter to ACW last October, the company warned it would close without its funding, and said at the time: “If lost, it will not be easily or affordably replaced.”
ACW chief executive Dafydd Rhys said since the “difficult decision” was taken on funding, it had worked with the theatre “in terms of supporting them to reimagine and restructure to a model which is not reliant on core funding on a multi-year basis”.
Mr Rhys said the theatre was given transition funding to look at new ways of working, for example.
“We look forward to continuing our regular dialogue with National Theatre Wales as they move into this new phase in their development,” he said.
“We have also commissioned a review into English language theatre in Wales, which will be published in the spring.”
