The East Coast main line is to be brought back under public control in what will be the third time in a decade that the United Kingdom government has called a halt to the franchise.
The move comes just over three years after Virgin Trains East Coast started running under a franchise of Virgin Trains and Stagecoach.
The transport secretary, Chris Grayling, told the House of Commons that after a "finely balanced" assessment by civil servants, he had chose to appoint the "operator of last resort" - a group led by the firm Arup and under government control - to run the service, rather than allow Stagecoach and Virgin to continue under fresh terms.
Transport Secretary Chris Grayling said he would terminate the contract with Virgin Trains East Coast from the end of next month.
In February Mr Grayling said the franchise would only be able to continue in its current form for a "very small number of months" as Stagecoach had "got its numbers wrong" and "overbid".
The new publicly controlled rail line will be renamed the London and North Eastern Railway (LNER).
The firm has run the East Coast franchise with Virgin since 2015 and said that the two companies had been in negotiations with the Department for Transport for a new franchise contract.
It is the third time since 2007 that the 393-mile (632 km) route has been returned to government hands, highlighting the difficulties for private companies of accurately bidding to run services on the privatized train network.
Perth-based Stagecoach, which has a 90 per cent stake in the franchise, angered MPs by announcing the decision minutes before Mr Grayling made a statement to the House of Commons.
Virgin Trains East Coast's contract will terminate on June 24 2018.
"Three times in under a decade, private companies have failed on the East Coast. We believe our plans offered a positive, value-for-money way forward for passengers, taxpayers and local communities, ensuring the continuation of the exciting transformation already underway on East Coast and a smooth transition to the Government's new East Coast Partnership", Stagecoach Chief Executive Martin Griffiths said.
"After three shambolic private sector failures on the east coast, the message should now sink in that these cowboys can not be trusted and should be locked out of the system on a permanent basis".