Ceramic goods manufacturer Donegal Parian China is closing its operation in Ballyshannon and moving across the Border four miles away to the plant of its sister company, Belleek Pottery, in Co Fermanagh.
The plant may shed up to 54 jobs, 10 of them part-time.
The firm said redundancies were inevitable but it could not say how many jobs would be axed. It said work would be available for some Ballyshannon staff in Belleek.
A company spokesman said the Donegal Parian brand would continue to be marketed, although it would now be manufactured in Northern Ireland.
Local councillors said yesterday the development marked the end of tourism and industry in Ballyshannon.
Cllr Seán McEniff of Fianna Fáil, who is also chairman of the North West Regional Tourism Authority, said: "I am very disappointed. Ballyshannon is the worst employment spot in the county. Now it has no factory."
He said the Minister for Enterprise, Mr Martin, was certain to face questions from business and community leaders in a planned visit to the area next month.
Cllr Barry O'Neill of Fine Gael, who lives in Ballyshannon, said the closure, scheduled to take place before the end of March, would also mean the loss of thousands of tourists to the Donegal Parian visitor centre.
Mr O'Neill (31), an RTÉ sports broadcaster who entered politics in last summer's local elections, added: "It's one of my saddest days in the past six months."