The NHS trust which ordered the closure of the Henderson Hospital in Surrey says it made the decision "with great sadness".
It does intensive work with people who have a moderate or severe personality disorder.
This means they have enduring emotional and behavioural problems which can involve them harming themselves or others.
Many people at the Henderson have experienced serious neglect or abuse in earlier years.
A consultant psychiatrist, Dr Diana Menzies, said: "These are people who, if not treated, tend to come back through the revolving door and on to acute wards in psychiatric hospitals.
"Closure of the service will add to the impoverishment of psychological treatments.
"It will be the most vulnerable in our society who pay."