HYCC Nursery, based at Horden Youth and Community Centre, in Eden Street, closed down on Friday, June 10.
Parents were informed on Wednesday and received official letters from the centre the following day.
In a statement on its Facebook page, Horden Youth and Community Centre confirmed it had made the “sad decision” to close the nursery.
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It stated that eight members of staff have resigned since Wednesday, June 1, although there are hopes the nursery could reopen at a later date.
The sudden closure has left parents scrambling to find alternative childcare, with some forced to take unpaid time off work.
Parents have praised nursery staff for “going above and beyond” and have spoken of being “devastated” over the closure.
Abbey Lawson, 27, whose two-year-old daughter, Elise, goes to the nursery, said: "Not only our children are devastated, we are devastated.
"This nursery is a big part of the community. They don’t go above and beyond just for the children, they do for the families as well. They’re there to support all of us.”
The senior care assistant, whose eight-year-old son JJ also attended the nursery, continued: "The effect that’s going to have on my little girl when she’s not going to the place she loves going to, the place where she runs in and cuddles with staff, it’s going to have a bad effect on her.
"And not just my little girl. All the other kids are not going to see their friends, they’re not going to see the staff they love.
"It’s going to have a really big knock-on effect.”
"It’s upset the children, not just the parents,” added Abbey.
Horden Youth and Community Centre said: “It is with great regret that after many days of deliberation with directors, trustees and Durham County Council, we have made the sad decision to close HYCC Nursery with effect from Friday 10th June 2022.
It added: "We are still working closely with Durham County Council in the hope of re-opening at a later date.”