Frontline has been told that its funding from the Association of London Government will not be renewed. The charity could not be reached for comment, but is believed to be in discussions with Shelter about taking over some of its services, said a source.
News of Frontline's plight comes in the same week that Safe in the City, a Peabody Trust-backed project launched in 1998 to support young people and children, and the 45-year-old East End charity, St Botolph's, were wound up due to lack of funding.
The closures have fuelled concerns about overcrowding in the sector.
There are more than 200 homelessness charities in London, and competition for funding has already resulted in a merger between Alone in the City and the Depaul Trust last November.
Depaul Trust chief executive Mark McGreevy said there were "too many agencies doing the same thing in the homelessness sector, and in future there will be less doing more".
St Botolph's, which had an annual turnover of £2.5m and provided various services to about 3,000 people a year, turned to rough-sleepers charity Thames Reach Bondway for a lifeline, but was turned down. Seventy jobs will be lost.
Thames Reach Bondway chief executive Jeremy Swain said he only heard about St Botolph's perilous financial position two weeks ago, when it was already too late to put together a rescue package. He said the closure was a "devastating loss" to East London, but that the funding stream for such a wide range of services was not strong enough. St Botolph's 89 bed spaces and training and education facilities for vulnerable people will be taken over by other agencies but some cuts are expected.
"It is very volatile out there," said Swain. "The funding situation is tougher than it's ever been. Ultimately, this should lead to better services but unfortunately there will be casualties. We are heading into choppy waters."
Safe in the City, which won an Association of London Government award for innovation in 2000, closed after funding from the Government's Single Regeneration Budget ran out last month.
A spokesperson for Peabody Trust, which provided office space and service support, said: "When we started out, it was decided that Safe in the City should have a fundraising team of its own and if they could raise money after the SRB funding ran out, then they could continue. In the end, that didn't happen."