EVOLUTION Sports and Fitness Centre at the Bendigo La Trobe University campus will shut at the end of this year.
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The Bendigo Student Association, the operator of the gym, confirmed the decision in a letter addressed to students, staff and gym members.
The letter, signed by BSA president Jessica Robertson and general manager Mitch Trevena, said the BSA could not operate the facility beyond December 31, 2014.
"The level of competition within the fitness industry in Bendigo has increased significantly since the gym opened 18 years ago," the letter said.
"In the near future there will be two gyms located less than one kilometre from the university. The proximity of such competition has impacted upon Evolution, as to the escalating costs associated with running the service."
"The decision to cease operating has not been taken lightly and whilst the board deeply regrets this decision, remaining open is no longer feasible."
Head of campus Robert Stephenson said university management was advised of the BSA's decision to close the gym on Tuesday.
Mr Stephenson said the university was in the early stages of looking at options to find an alternative solution for gym access for students.
"We're talking to the BSA about alternative models that might be available," he said.
"We're in the early stages of finding a solution but we're committed to finding a solution that will meet the needs of students because we're committed to making this campus an exciting hub for students."
Mr Stephenson said the gym building remained important to the institution's teaching program as an exam and recreation venue.