The Phoenix Theatre at Coniston, recently re-acquired by Wollongong City Council, is set to be sold.
On Monday, Wollongong councillors will consider having the land classified as "operational" under the Local Government Act, meaning the council could lease or sell the site without any statutory constraints.
Lord Mayor Gordon Bradbery told the Mercury on Friday that as much as he would love for the building to remain in council ownership, it was simply not feasible.
"We can't afford to continue to maintain the theatre," he said.
The theatre, sold by the council to community radio station VOX FM for $1 in 2006, was recently sold back to ratepayers for the same sum.
The Phoenix Theatre group would be granted a short-term licence to continue using the building in the interim, the council report said.
Cr Bradbery anticipated expressions of interest for the site would be advertised in the near future, adding he hoped it would be retained as a cultural venue by its new owners.
However, the flagged sale will have at least one opponent - Labor councillor Ann Martin.
Describing the theatre as a "significant cultural asset" for the people of Wollongong, Cr Martin said she supported the building remaining in council hands as a theatrical venue committed to local productions.
"The process of classifying this land as operational makes a sale possible, which is why I won't be supporting the recommendation," she said.