Parents of 60 pre-school youngsters have been told they will have to seek new places while a question mark hangs over 65 others.
An error on the application form submitted by Buchanan Nursery to East Dunbartonshire Council meant the funding claim was rejected.
Nursery staff are now pleading with council bosses to allow them to appeal.
Manager Julie Harvey, who has run the Bearsden nursery for 16 years, said: "I am devastated and so sorry for the pre-school children and their parents that this has happened as a result of mistakes in a document and I implore the council to consider an appeal."
A tender for support funding for the three to five year group was refused on the basis all the information required to be submitted was not completed accurately. Four Seasons Health Care, which owns the nursery, has admitted mistakes in the document due to human error, not by the nursery manager, but head office staff.
However, the tender department at East Dunbartonshire Council did not ask for further information.
The failure of the application now raises a question over the viability of the nursery.
The council said it would help parents find new nursery places and added it was bound by legal procedures.
Buchanan nursery, which has served the local community since 1996, has a roll of 60 children aged three to five with 19 staff members.
In addition to the pre-school group, it cares for children up to two years.
Bosses at the centre said there is currently a waiting list for places and the nursery had had high ratings from the quality regulator, the Care Inspectorate.
The nursery has been used on a regular basis to pilot new initiatives in nursery care on behalf of East Dunbartonshire Council.
And its manager Julie Harvey has been asked to assist in the verifying and evaluation process for other nurseries.
Gordon Currie, director of Education and Children's Services, said: "We understand the concern of parents in the current situation with Buchanan Nursery.
"The council followed the required legal and procurement procedures when assessing this and other tenders for awarding early years' partnership contracts.
"The Council's Early Years and Childcare Team will work with parents to offer alternative early learning and childcare options for their child within local authority or partner providers.
"Parents affected should contact the Early Years Information Line on 0141 578 8707."