Asian People with Disabilities Alliance has been told it will have to leave premises at Central Middlesex Hospital in Acton, West London by the end of March, as the building is needed for offices in a new £73m hospital development.
But the charity wants compensation for being forced to leave a building it has renovated with state-of-the-art disabled facilities.
The charity received a government grant of £450,000 to develop the site over 10 years and provides specialist day care and rehabilitation facilities as well as an IT centre for disabled people.
"We have spent £450,000 on renovating the building, and introducing disabled access above and beyond legal requirements," said a spokesman. "This was taxpayers' money that was allocated for the use of BME people with disabilities and the ultimate beneficiary is the hospital. It is sheer waste that a fully disabled-access building is not being used in that way."
But a spokeswoman for North West London Hospitals NHS Trust said: "You have to balance the 250,000 people in Brent who will benefit from the hospital against the minority of people currently using the building." She added that the charity had always known it would have to vacate the building after 10 years, but was refusing to leave despite being offered alternative premises by the trust.
She denied the hospital had misused public funds, saying the charity had occupied the building rent-free for five years. "We have been subsidising them significantly."
The charity is demanding the trust fork out £800,000 to help it find a new home. But the trust spokeswoman said this was not possible as the trust had a deficit of £5.5m.
Krishna Sarda, chief executive of the Council of Ethnic Minority Voluntary Organisations, said the charity's treatment was "shameful".
"The Compact and all the hype about providing support, I'm sorry to say, has made very little difference if any to the ethnic minority voluntary sector," he said. "I have to ask the question, would they have been treated in this way had they been white?"