Offer, a community empowerment group in Sheffield, is set to close after the city council withdrew £350,000 of grant funding.
The move will result in the loss of eight full-time equivalent posts at the organisation, which represented charities on Sheffield First Partnership, the local strategic partnership, and engaged in capacity-building across the city.
The decision to withdraw its funding has led some to say that the Liberal Democrat-controlled council is failing to value the sector and is disregarding cross-sector working.
A petition signed by 120 organisations and 63 individuals was handed in to Sheffield City Council yesterday, urging it to show greater commitment to the voluntary sector.
It says the sector should have "the ability to influence the planning, design and delivery of policies, strategies and services in Sheffield".
Dave Jackson, director of Offer, said the organisation felt let down.
"We have done a large amount of work in partnership with the council and other agencies showing Sheffield as a place that gets partnerships right," he said. "It feels like that has been completely ignored."
Besides its council funding, Offer also received a three-year grant of £112,000 a year from non-departmental public body Capacitybuilders, which has a year to run. The two parties are negotiating about transferring the grant to another voluntary organisation.
Offer, which will close at the end of the month, had been in merger talks with Voluntary Action Sheffield.
A statement from Voluntary Action Sheffield said: "We believe that the loss of the work undertaken by Offer will leave a big hole in the support available to the local voluntary and community sector and the capacity of the sector to be involved in contributing to Sheffield First Partnership."
Kevin Curley, chief executive of local infrastructure group Navca, which is based in Sheffield, said: "I know public finances are tight, but cutting the funding of organisations that represent local communities and give local people a voice is shortsighted - their work saves money in the long run."
A council press officer said she could not comment because the authority was in the pre-election period. She said Third Sector should contact council leader Paul Scriven. His office did not respond to calls.