Greenwich Council has set the wheels in motion to close Blackheath Bluecoat school.
The cabinet agreed on Tuesday night that a consultation on whether to close the secondary school will take place.
Blackheath Bluecoat, the only Church of England secondary school in the borough, has seen improving results but council officers say "this has not been translated into an improvement in the perceptions of the school in the wider community or the pattern of recruitment."
A report presented to the cabinet says "Blackheath Bluecoat CE Secondary School has failed to recruit to its planned admission number over an extended period."
The school also has a "very substantial financial deficit with a high risk that it cannot be recovered within a reasonable timeframe."
The cabinet agreed a period of consultation which will see a decision on the school's fate decided in January next year. Officers have suggested a timetable which could see the school close in August 2013.