Toys R Us UK has gone into administration, putting over 3,000 jobs at risk.
Administrator Moorfields has been appointed to conduct what it called an orderly wind-down of the company's store portfolio, although the firm insisted it is still seeking a buyer.
Stores will continue to stay open and remaining stock will be sold off at heavily discounted prices and subject to special promotions.
In what was a black day for British business, electrical specialists Maplin also announced it had gone into administration.
Toys R Us customers are being warned stores may close without notice and are being urged to redeem gift cards and vouchers as soon as possible.
The firm had an outstanding £15 million tax bill and owned money to lenders.
Worse-than-expected trading over the crucial Christmas period put further pressure on the retailer already struggling with falling consumer spending, soaring inflation and competition from online rivals.
Simon Thomas, Moorfields partner, said: "We will be conducting an orderly wind-down of the store portfolio over the coming weeks.
"We have informed employees about the process this morning and will continue to keep them updated on developments. We are grateful for the commitment and hard work of employees as the business continues to trade.
"We will make every effort to secure a buyer for all or part of the business."
Richard Lim, chief executive of Retail Economics said: "All is not well on UK high streets.
"The perfect storm of spiralling operating costs, softer consumer demand, and seismic structural changes has claimed another victim."
Founded in 1985, Toys R Us is one of the UK’s largest toy retailers with over 100 stores nationwide and over 1,500 stores globally in 33 countries.