Thornton Library is likely to reopen under Lancashire County Council control rather than being run by volunteers.
The town’s Gala Committee had hoped to take over the site as a community hub.
However, Coun Andrea Kay said the group had now pulled out of a proposed deal with Lancashire County Council.
Coun Kay still hopes to have Thornton Library open this year and is working to ensure community groups will still be able to make use of the facility.
She said: “I understand the Gala Committee has now withdrawn from the process.
“I am continuing to work with Coun Peter Buckley over the libraries.
“UR Potential still has a strong plan for Cleveleys and we hope that will re-open in September.
“We are hoping Thornton will re-open under County control but I am working with the volunteers who wanted to be part of the plan to see how they can be accommodated.”