The Swedish foundation that owns the vessel "Gotheborg", a replica of the 18th century galleon from the Swedish East India Company, announced Thursday it could no longer afford the upkeep.
"This is a tough decision that we've been forced to make," said Lars Malmer, chairman of the Ostindiefararen Gotheborg foundation.
"We would have preferred it to continue sailing, but can confirm that the financial conditions do not exist," he said in a statement.
For reasons still unknown, the ship struck an underwater rock as it neared its home port.
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Within view of the harbour, the vessel sank slowly in shallow waters.
While the crew was rescued, almost nine tonnes of chinaware went down to the deep and was recovered only in the late 1980s by volunteer divers.
The replica, Gotheborg III, took 10 years to make using shipbuilding techniques and materials believed to have been in use in the 18th century.
However, the ship is equipped with modern technologies to meet current safety standards.
The modern-day Gotherborg set sail for the first time in August 2005 and began to retrace its old route west three months later.
It has since anchored in nearly 100 ports in over 20 countries, employed thousands of sailors and welcomed a million visitors aboard.
Malmer said the foundation will consider any proposal to save the ship by selling it to buyers in any country, or to keep it in Gotheborg, the port city which owes its fortune to trade during the 18th century.