About 20 staff at the National Gallery of Australia have been told their jobs will not exist on Monday.
Letters delivered in person to staff and seen by Fairfax Media show many will become "excess officers" but retain their rights as employees.
The gallery's deputy director, Kirsten Paisley, told staff that management would consider transferring them to other areas of the gallery or offer voluntary redundancies.
Union sources indicate the job cuts represent about 8 per cent of the workforce, including some senior positions.
The job losses were outlined in the 2016-17 federal budget, which announced that 63 full-time positions would be cut from cultural institutions over 12 months.
The gallery was also hit by the mid-year economic and fiscal outlook, which took $36.8 million from "cultural and collecting entities within the arts portfolio".
Gallery director Gerard Vaughan warned in December that the institution's council and management were "deeply concerned" after "many years of cuts" to all arts agencies.
"Any reduction in funding now has serious consequences," he said.
Community and Public Sector Union deputy secretary Beth Vincent-Pietsch said staff were shocked and upset by the announcement.
"We are talking about highly qualified staff with a number of tertiary qualifications who had to work hard to get a job at the gallery," she said.
"They are part of its lifeblood and are passionate about what they do. They are now feeling vulnerable and unsure of their futures."
Staff were told they will be considered for vacant positions without competition from other applicants, provided they "possess the ability to perform the tasks of the position within a reasonable period".
Ms Vincent-Pietsch said many gallery staff were specialists in their fields and might not be easily transferable.
"We already know the head librarian has been told her position is considered as excess," she said. "It sends a signal they may be considering the closure of the library.
"Other staff are from all over the gallery. This represents a long history of corporate knowledge."
Ms Vincent-Pietsch said the National Library was also expected to announce job losses in coming weeks, although the number was still being verified.
ACT Chief Minister Andrew Barr said Canberra's cultural institutions had been treated disgracefully.
"I'm at a loss to understand how they can possibly justify crippling one of our most significant national cultural institutions to save a buck, while they are prepared to spend $175 million on a marriage equality plebiscite when they should just do their job and make the decision in the parliament," he said.