Archives New Zealand is shutting down its flagship digitisation programme.
Historian Vincent O'Malley described it as "a devastating blow".
It has been running for seven years, digitising almost two million historically significant images to protect them from wear and tear and make them accessible worldwide online.
Archives said in an announcement on its website that three permanent jobs and some fixed term positions will go.
This was not due to the government's public sector cuts, rather the programme had time-limited funding through to this date and it had been unable to secure ongoing funding, Archives said
In a statement, chief archivist Anahera Morehu said: "We acknowledge the importance of digitisation".
It was in the middle of construction of a $300 million new Archives building in Wellington.
Despite the price-tag, the new building will be too small to hold all its records, so Archives looked at extra storage in Levin.
However, it has just axed that despite spending $12m preparing for it, Stuff reported.
O'Malley said digitisation was meant to be central to the agency's long-term strategy.
"Archives New Zealand had really staked their entire future on their digitisation project," he said.
"So for that to be shut down completely is a devastating blow for many researchers, particularly people who can't physically access Archives New Zealand reading rooms."
The reading rooms imposed much more restricted hours in 2020.
The shutdown includes closing the digitisation on demand service by which researchers and historians could pay to get a certain document digitised.
Archives "2057 Strategy" has three strategic focus areas, the first being, "taking archives to the people ... promoting what we do and gearing up for the growth in digital and physical holdings".
Amateur historian Dick Wilkin worried about access.
"This would be bad news for me, as I live in Lyttelton and nearly all the mining maps and plans I am interested in are in the Auckland Archives facility," he told RNZ on Thursday.
"At the moment it is a bit of a mission ordering stuff at $25 a pop, but it is workable. Fortunately, I have already got scans of all the items I require for my current research."
There had already been many complaints about how the reading rooms operated - "for example, people researching Treaty of Waitangi Claims find it a real bottleneck, and it seems it could get worse".