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Roslyn New World will close on April 27, ending 37 years of business.
Its 10 fulltime and several part-time staff were told on Monday night.
The supermarket, which opened in 1977, was no longer economically viable, Foodstuffs South Island general manager retail operations Alan Malcolmson said.
''We feel we owe it to the owners and their staff to ensure they have certainty for the future, and as such we have taken the decision to close the store,'' he said.
The franchise owners declined to talk to the Otago Daily Times yesterday, but Mr Malcolmson said they had been approved to buy New World Westport.
Mr Malcolmson said Foodstuffs was working with the supermarket's employees to help them get jobs in Dunedin.
''It is too early to say how many staff will be taking up roles elsewhere in the business. However, Foodstuffs is also offering affected staff career, curriculum vitae and counselling support,'' he said.
The difficult decision to close Roslyn New World had not been taken lightly and followed an extensive review of the business, Mr Malcolmson said.
It is the fifth retail business to leave the Roslyn shopping centre in less than a year, following the closure of the Roslyn Toy and Book Centre and children's clothing shop Cradle and the relocation of Zucchini Bros and White By Design.
Roslyn resident Emeritus Prof Jocelyn Harris said the supermarket closure was a ''great shame''.
It was a case of small businesses being forced out of the market by those with more money and power, and that defeated the Dunedin City Council's strategic plan to create community hubs, she said.
Prof Harris was involved in a 2004 petition against the opening of FreshChoice Roslyn, on land adjoining Roslyn Village.
Roslyn FreshChoice managers declined to comment yesterday, as did Roslyn Village business owners spoken to by the Otago Daily Times.
• April 27, 2014: Roslyn New World will close.
• March 2014: White By Design relocates to George St.
• September 2013: Zucchini Bros relocates to Princes St.
• August 2013: Cradle sold, relocated to Wanaka.
• May 2013: Roslyn Book and Toy Centre closes.