The Chicago News Cooperative, a nonprofit journalism outlet that provided regional coverage for The New York Times, will effectively close next week, the Times and the Chicago Reader report.

The founder and editor of the cooperative, James O’Shea, told the staff on Friday that the nonprofit newsroom, established in the fall of 2009, would cease operating its Web site and supplying content to the Times on February 26.

The move came after the MacArthur Foundation, which had provided about $1-million to the cooperative, told the organization it would limit its funding to smaller grants for specific reporting projects until the Internal Revenue Service rules on applications for 501(c)(3) status by nonprofit journalism organizations.

The cooperative asked The New York Times to increase its payments for Chicago coverage, but Mr. O’Shea said both sides concluded that the arrangement “did not make economic sense.”

Another nonprofit supplier of regional news to the Times, The Bay Citizen in San Francisco, is considering a merger with the Center for Investigative Reporting.