Terry Laybourne's Bistro 21 in Aykley Heads, Durham suddenly closed after a notice appeared on the door at the weekend.
The restaurant, which has been in the city since 1996, had its last service on Saturday 24 October.
Its owners said the decision to close was made because falling staff numbers were "threatening to impact on the quality of the restaurant."
A notice appeared on the door stating: "As of Sunday 25 October Bistro 21 will be closed." All enquiries were directed to the parent company 21 Hospitality Group.
Nick Shottel, the group's brand director said negotiations to put the lease up for sale had been going on for several months. He said the business wanted to concentrate its efforts on the other restaurants in Newcastle and staff had been informed.
He said: "We had an obligation to tell staff; they have been extremely loyal. We offered them all jobs in the other restaurants but for some it was going to be too difficult geographically.
"Some staff members decided to move on and that was going to put pressure on the remaining team and impact on the quality.
"We were not going to be able to sustain the restaurant and it would have been impossible to recruit in time for the run up to Christmas."
Shottel said the final decision to close the restaurant was made last Tuesday, with staff being advised the following day and customers with reservations being contacted since then.
Customers with advanced bookings are being offered alternative options at the group's other restaurants, which comprise Café 21, Café 21 at Fenwick, Caffe Vivo, the Broad Chare and Ko Sai, all in Newcastle.
The lease on the restaurant remains up for sale. Shottel declined to state the asking price but said there were "a number of prospective purchasers".