After cutting funding to the town's historic theater, Arts Council England (ACE) declared that it was "absolutely committed" to supporting performing arts in Oldham.
After losing all of its funding from ACE, the Oldham Coliseum is scheduled to close on March 31.
Oldham Council said the structure was unfit for its intended use and unveiled plans for a new £24 million theater despite the efforts of campaigners to save the structure.
For the new theater, ACE declared that it was "fully behind the plans.".
A public meeting against the proposed closure was attended by hundreds of activists on Tuesday at Oldham Coliseum, including actress Maxine Peake.
The celebrity, whose hometown is Bolton, praised neighborhood theaters as the "lifeblood" of towns and led a chant of "hands off Oldham.".
ACE representatives were invited to the meeting but declined, so a symbolic empty chair was set up on stage in their place.
The 135-year-old theater announced that it had begun a period of consultation with all of its staff after the funding reduction left it unable to come up with a rescue plan.
Oldham Coliseum is "a well-loved fixture" and "understandably many people have strong feelings" about its future, according to an ACE spokeswoman, but it is too "high risk" for additional investment.
As the custodians of public funds, she said in a statement, "Oldham Coliseum Ltd. has been facing financial and governance challenges for some time and we could not invest in an organization which we assessed to be so a high risk.".
She claimed that Oldham Council owned the structure and that it had "never been part of our funding to the company.".
"ACE is absolutely committed to supporting performing arts in the town and overall, our investment in the arts in Oldham will be higher than ever before," she continued. "ACE is standing by our commitment to invest £1.85m in performing arts in the town.".
When funding runs out on March 31, she promised to provide £360,000 in assistance.
Oldham Council's Labour leader, Amanda Chadderton, claimed that the current structure had asbestos and a "litany of issues.".
The council announced that it would submit plans for a new theater on Union Street with an auditorium that can accommodate 300–350 people and a smaller 120-seat studio in the summer.
For the next three years while it is being built, it will formally accept £1.85 million from the Arts Council on Monday.
The plans, according to ACE, "will ensure that there is brilliant theatre in Oldham for people to enjoy for years to come," and they have their "full support."
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