Management called staff to a meeting at 2pm yesterday where they were informed the hotel was no longer economically viable and would close on Thursday.
The seven-bedroom house, which sits on 2.8ha, will be put on the market by owners Nico and Irina Francken, who have owned it since 1999.
The global recession had made the "business untenable", Mrs Francken said in a statement.
"The effects of the current global recession have created a dramatic downturn in the high-end accommodation sector, thus making it most difficult to sustain a property of this type."
Her husband's declining health was also a reason for the closure.
She planned to join her husband in Singapore.
Staff and suppliers would be paid in full.
The hotel was on the market in 2004, with a price tag believed to be more than $2 million.
The property has a capital value of $1.8 million.
Corstorphine House
Built in 1863 for John Sidey and remained with the family until the 1950s.
Has a New Zealand Historic Places Trust category 1 status.
Refurbished between 1999 and 2001 by present owners Nico and Irina Francken.
Guests have included Prince Charles, actress Gwyneth Paltrow, singer Chris Martin and actor Daniel Craig.
A double room during the high season (October to March) costs $790 a night.
