Cheryl Waddington has been running Coffee Aroma at Telford Theatre in Oakengates for the last five years.
The cafe owner says she was given the news by Telford & Wrekin Council last Tuesday that the authority wants to close the cafe and replace it with a restaurant.
The move is part of a £15.5 million regeneration of Oakengates town centre paid for by the Government's Levelling Up Fund, which includes a planned revamp of the theatre.
But Cheryl says the move will put her and her six employees out of a job.
She said: "They want me out. The council said their surveys show that customs want a restaurant not a cafe.
"I have been here five years. It is not about the money - some weeks I don't make any - but it is a place people in the community come together.
"We have people come to the cafe from Wales. We bring people to Oakengates. The council have offered me another, much smaller unit in Market Street but at three times the rent I pay now. I can't afford it."
She said she has had to break the news to her staff and customers that the award-winning cafe is set to close.
"We have won 33 awards and we are busier than ever. I think it is really disgusting of Telford & Wrekin Council."
Cheryl, who has to close the cafe by January 2024, said she was "heartbroken" at the council's decision.
"This cafe is my life. The news is still sinking in," she said.
Nearly a hundred comments of support have been posted to the cafe's Facebook page since Cheryl told her customers the news this week with some commentators branding the council's decision as "disgusting", "wrong" and "money-grabbing".
Some supporters have said they will begin a petition to force the council to change its mind.
A spokesperson from Telford & Wrekin Council said: “The ambitions for the future of the theatre are of such a scale that they can only be delivered by closing it whilst the work takes place.
“We know that confirmation of the theatre closing for redevelopment has been disappointing for the Coffee Aroma team.
“It is a business that we have supported with high street grants and a low rent.
“As part of the plans to regenerate the theatre, we have offered the owner of Coffee Aroma alternative premises and will continue to communicate with her on next steps.
“We recognise that the alternative unit is more expensive, but this reflects current market rates. We have suggested ways in which we can help overcome this, which the business has so far rejected, but we will keep talking.
“The council remains committed to supporting businesses in Oakengates. We are working closely with those affected by the proposals, assisting them in relocating to vacant premises in Oakengates or within the borough. We will also be launching a new round of Pride In Our High Street funds later in September and businesses will continue to benefit from free local parking."