The Tameside Council in Greater Manchester has scraped the £36,000 virtual town hall on online computer game Second Life, after only one year.
Council IT bosses said the initiative was scrapped as they were unable to "justify the costs".
The move has been criticised by opposition members who believe that the local authority should have spent the money on fixing roads and improving basic civic amenities instead of wasting it on something lacking in use in the real world.
Conservative councillor and leader of the opposition, John Bell, said: "They want to get in the real world, not a virtual one. It’s absolutely barmy. They must be out of their heads."
The Telegraph reports that the council's IT department had set up a town hall on a 'rented' island on Second Life with the aim of bringing council services to those who had mobility issues or "issues surrounding self-esteem".
Justifying the decision to scrap the virtual town hall, a council spokesperson said: "While the service has not been continued, it has allowed us to consider new ways of doing business that we may well find we utilise further in the future."