The decision was taken by British minister Barry Gardiner despite opposition from the major political parties, which say they were not consulted because of the continuing suspension of the Northern Ireland assembly.
Mr Gardiner's decision comes just three months after the parties were involved in talks with Ulster's Department for Education and Learning about what they then believed to be a possible reduction in the learndirect budget.
Now the University for Industry, which is responsible for learndirect, has been told funding will be withdrawn altogether.
The department claims Ufi "were not misled and were kept informed of developments throughout". It says the decision was "based on the competing priorities for funding across government".
A spokesperson for Ufi said: "Ufi regrets the decision to withdraw funding from learndirect and, in particular, the loss of opportunity for people to return to learning in a way which has been particularly successful with disadvantaged learners.
"We are also disappointed, in view of the constructive relationship between the department and Ufi, that there has not been a period of consultation."
Ufi's regional centre in Belfast will close, along with learndirect centres around the province which are responsible for running the courses.
Two-thirds of the providers are from outside further education, including private companies and charities, some of which face an uncertain future as they lose a major part of their income.
The decision is opposed by Carmel Hannah, the SDLP member who was the lifelong learning minister until the province's devolved assembly was suspended.
The Ulster Unionist Party has also reacted angrily to the decision, saying learndirect plays a vital role in the province's economic recovery during the fragile peace process. Sinn Fein also believes Ufilearndirect should continue to be funded.
Mr Gardiner's decision means no new students will be signed up after August and funding for completion of courses will continue until March 2006.
Nearly 50,000 people have studied at learndirect centres in the province, mainly doing online courses focusing on computer skills. Northern Ireland's operation has faced few of the financial difficulties which have been experienced in England.
Learndirect centres which heard about the shock announcement last week include Dairy Farm Training, on the western edge of Belfast, one of the first learndirect operations to open in Ulster in 2000.
It takes 1,500 students each year, typically doing computer courses, English for speakers of other languages and basic numeracy and literacy.
They have included asylum-seekers and members of Ulster's long-established Chinese community, as well as ex-offenders on rehabilitation programmes.
Brenda Close, the centre's manager, said: "If it were not for direct rule, there would have been much more discussion about this. We knew before Christmas there would be some changes but we had no idea this would happen.
I had to tell the staff and they were just shocked.
"We may have to make redundancies but there is even more concern for what will happen to our learners in an area of high unemployment."
The most recent inspection report on Dairy Farm, published in 2003, showed that, at the time of inspection, it had already exceeded its target 1,123 registrations on to courses for the year.
Further education-run learndirect courses include those at the Cookstown centre, affiliated to East Tyrone college, which increased registrations from 286 in 2001 to 505 in 2004, with a retention rate of 80 per cent.
Ulster Unionist education spokesman Esmond Birnie confirmed discussions with ministers in November had been purely about the size of learndirect's budget.
He said: "We were talking to them about one thing in November and now, in January, we find they have done something else entirely. This raises questions about the procedures which are being followed."
Mr Gardiner has made no public statement about the closure, and his spokesman said he would not be available for interview.