The Public cost £67m and opened in 2008
An arts centre that opened two years behind schedule and millions of pounds over budget does have "a long-term future", Sandwell Council said.
The council has said it cannot continue spending £30,000 a week to subsidise The Public, which cost £72m to build.
But after a cabinet meeting councillors said they were in talks to secure a "financially viable future".
Leader Darren Cooper said it was a "crying shame" but people would "inevitably" lose their jobs".
The authority said it would have a shortlist of options for the future of the arts centre ready for a public consultation "in four to six weeks".
Sixth form centre
Mr Cooper said: "We have not voted to permanently close The Public - and we've never said we were going to.
"One of the options is Sandwell College potentially taking over the building to use it as a sixth form and lifelong learning centre - with arts, community and business provision too."
James Higgs said a petition to save the public
has 5,000 signatures
The original funders of The Public project are also being consulted about future plans, he added.
James Higgs, 19, a worker at the LearnPlay Foundation who are based at The Public, welcomed the statement from the council.
"I feel like we are getting somewhere but we still want to know more.
"I still think we can make The Public work and our petition of over 5,000 names has shown the council how much support there is for the venue," he said.
The council said the current agreement with Sandwell Arts Trust to run The Public will end on 30 November when it will hand the building back.
The trust had asked for a minimum five-year deal to run the centre.
More than 380,000 people visited The Public in 2012-13 according to Sandwell Arts Trust. More than half of these were from the Sandwell area.
A total of 30 businesses are based in The Public.
The public and the press were excluded from the meeting where the decision was made because the council said "commercially sensitive information" was being discussed.