The 50-year-old Unicorn Theatre for Children is in financial crisis and will close unless it can raise pounds 200,000 from a public appeal.
Ironically, news of the crisis breaks two days after the launch of a book, Creative Britain, by Secretary of State for Culture, Chris Smith, in which he states that education and access are two of the cornerstones of Britain's arts policy.
The Unicorn is famous for both its educational work and for encouraging thousands of children to go to the theatre for the first time.
It is one of only two children's theatres in Britain. The other is the Polka Theatre, in south London.
Critically acclaimed, and attracting 50,000 children over the last year, the plight of the Unicorn has nothing to do with its record as a children's theatre.
Based in the Arts Theatre Building in the West End of London, it is dependent on rental from other productions in the evening to supplement its own income. While the Unicorn's daytime shows have done well, the evening productions, which it also programmes, have fared badly over the last year, losing an extra pounds 50,000.
The Unicorn has long wanted to have a purpose-built theatre of its own and is preparing a Lottery application. But at present it has a deficit of pounds 340,000. The theatre receives a grant of pounds 320,000 from the London Arts Board.
Performers who featured at the Unicorn early in their careers include Sylvester McCoy, Maureen Lipman, Amanda Barrie and Jenny Seagrove. Unicorn writers have included Shirley Hughes and Adrian Mitchell.
Tony Graham, the artistic director, said yesterday the theatre would have to close if the pounds 200,000 was not raised.
He added that he had plans for it to become a unique cultural centre for children, showcasing international work, doing research into children's theatre and continuing with its successful story-telling festival of this year, as well as maintaining its reputation for children's shows.
He said: "The closure of the Unicorn would be a disastrous loss for London's children. It would seem to be deeply ironic when we are repeatedly told that our national cultural priorities hinge on children, education and access.
"Over two and a half million children have visited the Unicorn since we began; many well-known actors made their first appearance here; the Unicorn occupies a very special place in people's hearts. Everyone just finds it inconceivable that we should go down."
Those wishing to contribute to the Save The Unicorn fund should telephone 0171-836 3334.