The Beauchief Hotel is to be redeveloped for housing.
The restaurant shut and the rooms closed to guests last month, when bosses at the Abbeydale Road South venue decided to cease trading.
Dozens of jobs were lost and couples who had booked to get married there had to find an alternative wedding venue.
When the closure was announced last October, bosses gave high repair costs on certain areas of the hotel as the reason behind the decision.
A spokesman for Sheafbank Investments, a consortium of businessmen which owns the hotel, said it is now envisaged that the main building will be turned into apartments, with houses built on the car park.
“We will be submitting a planning application for residential development on the site, which should go in within the next month or so,” he said.
“We’re also looking at other commercial avenues on the site, but at this moment in time the idea is to pursue a residential application.”
The hotel reopened in April 2012 after BrewKitchen - a joint venture between Richard Smith’s restaurant group and Thornbridge Brewery - took over the venue.
BrewKitchen’s portfolio includes The Cricket Inn at Totley, The Inn at Troway, Graze Inn on Ecclesall Road and The Rose Garden Café in Graves Park.
The Beauchief was built in 1900 as the Abbeydale Station Hotel.
The Sheafbank spokesman said: “I think that was the third let that’s gone bust in the last seven or eight years - something would tell you it’s past its useful life for that form of business.
“We’re not in that business, and someone more than capable in that business failed. They decided to shut the doors because it wasn’t working for them.”
But he added: “Obviously local people have got a lot of fond memories of that building.”
In October, operations manager Michael Arthur said the lease was up and that the area ‘most in need of attention’ for repairs was where wedding ceremonies were held.
An auction was held at the hotel on Tuesday with nearly 400 lots, ranging from tables and chairs to statues and kitchen equipment. A spokeswoman for Ellis Willis & Beckett auctioneers, which handled the sale, said there was ‘a lot of interest’ and that ‘a good proportion’ of items were sold, with takings running into thousands of pounds.