A special general meeting of the club on Monday night decided to support a motion that the club be wound up on October 31.
The club's constitution stated a special meeting of the club had to be held to vote on it going out of business. Club president Irene Todd said the meeting unanimously agreed to cease operating.
The club, which started in 1975, had about 900 members in the late 1990s, but numbers had slowly dwindled. It now has about 50 members.
It once had clubrooms on the terrace side of Carisbrook, which were open on game days and well supported.
But numbers have steadily dropped and when the teams - the Highlanders and Otago - moved to Forsyth Barr Stadium the club was forced to follow suit.
Over its 42 years, the club has had seven different clubrooms, but its final rooms had been the bar beside Gate E at the Otago Daily Times stand end of the roofed stadium.
Ms Todd said patronage had steadily declined.
The club had tried various initiatives to boost numbers, with little success.
It had received plenty of support from the Otago Rugby Football Union over the years and was thankful for it.
Many similar clubs around the country were heading down the same path as the Otago club.
Member Gary Clegg, who joined the club when it started, said the closure was sad but it was a sign of the times.
As part of its constitution, if the club folded any assets would be given to the promotion of junior rugby - below secondary school level - within Otago.
Ms Todd said she had no idea how much in assets the club had.
It also had lots of memorabilia, such as posters and programmes, given to it over the years, and would look at returning it to donors.
Otago Rugby Football Union general manager Richard Kinley said it was disappointing for the club to have to fold, but the environment had changed around domestic rugby.
