The moves, made on the Queen's own initiative, are separate from the pounds 750m-a-year cuts in the Defence Cost study to be announced next month.
Britannia costs about pounds 10m a year to run and needs a pounds 17m refit in 1997 to keep it running - and then only for another five years.
No decision has been made on what to do with Britannia or on a possible replacement, but the Queen is understood to believe that the changed pattern of Royal travel overseas obviates the need for a royal yacht. It has a wartime role as a hospital ship but has never been used for that purpose.
A Buckingham Palace spokesman said it was hoped Britannia would serve a useful purpose in 'this country', suggesting that sale to a wealthy foreigner was unlikely, although he and the MoD refused to rule it out.
One suitable retirement use would be as a floating conference centre, although some in the Navy prefer the thought of using it as a floating target for anti-ship missiles and laser-guided bombs.
Britannia entered service in 1954 and has covered a million miles, visiting 600 ports in 145 countries. This week it is in Helsinki where Michael Heseltine is conducting a trade seminar.
About half of Britannia's 277 crew will return to normal Navy duties, but the permanent Royal Yacht Service with 108 sailors and three Marines may be disbanded.
Next April, the Queen's Flight is to move from RAF Benson, in Oxfordshire, to RAF Northolt, London, to join 32 Squadron. The new unit will be called 32 Royal Squadron. Senior Royals use the aircraft in the scarlet and white livery of the Queen's Flight for State visits and also a small amount of private travel. Last year the latter accounted for 40 hours' flying, costing the taxpayer about pounds 80,000. In future, the Queen will reimburse the MoD.
Yesterday's announcement about Britannia was angrily condemned in the Commons by the Tory MP for the Isle of Wight, Barry Field, who protested that 'Britain without Britannia is like the Tower of London without the Crown Jewels'. Mr Field told the House of Commons: 'This is horrendous news to my constituents and myself and I am sure many people throughout this country.'
To Tory cheers, he demanded an urgent debate on the issue. But the Leader of the Commons, Tony Newton, stressed the announcement also said that the Government believed it was right to consider, without commitment, whether there should be a replacement at some future point.