Banbury School is lose its technology school status and the hundreds of thousands of pounds cash that goes with it.
The Government withdrew the funding because progress has been disappointing.
Vice-principal Graham Teager said the news was a huge disappointment because the school was on the verge of starting a £2.7m building project, knocking down the technology department and building a new building with nine technology rooms.
Banbury was one of the first state schools in the county to be awarded technology school status and it was reviewed and inspected.
An initial grant of £100,000 was given to the school by the Government during three years and the school raised £132,000 from local businesses.
The school was also awarded funds per pupil per year up to an annual maximum of £100,000.
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