The centre in Pontourny, western France, which opened in September 2016, was aimed at convincing radicalised 18 to 30-year-olds to turn their back on extremism.
But Interior MinisterGerard Collomb said the experiment "has not been conclusive".
"The experiment of this centre, which operates on a voluntary basis, has shown its limitations. The government has therefore decided to end the experiment," the minister added.
The centre can accommodate 25 people, but has never had more than nine residents, none of whom have completed the de-radicalisation programme. The centre has been empty since February.
Collomb said the government would now look at ways of developing alternative de-radicalisation programmes.
The centre in Pontourny had been criticised by local residents alarmed that those at the centre could come and go freely in the town.
A Senate report published on July 12 was heavily critical of France's de-radicalisation strategy and called for the centre to be closed.
France has been a consistent target for jihadists since 2015, with more than 230 people killed in attacks.
The deadliest was a series of shootings and suicide bombings targeting bars, a concert hall and the Stade de France national stadium in Paris in November 2015 in which 130 people died.
The Islamic State group claimed responsibility for the attack, saying it was in revenge for French air strikes on its militants in Syria and Iraq.
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