AMCOR will be forced to close its Alphington site by December 31, even if it fails to find a buyer.
The Environment Protection Authority has confirmed the paper giant will lose its licence at the end of the year.
Speculation about a potential buyer of the estimated $200 million site has died down in recent months in the lead-up to the paper recycling mill's closure.
Amcor spokeswoman Peta Mckellar refused to comment on whether it was negotiating with potential buyers.
The site will remain operational until the company's new paper mill in Botany, NSW, opens this year.
Amcor faces extensive decontamination works at its 16.5-hectare site in Heidelberg Road. The company met Yarra council last week to discuss its plans to vacate.
Mayor Geoff Barbour said a site visit in the next few weeks would give the council a better understanding of what contamination was present.
"Council will have a role to play in terms of overseeing the planning processes around the site and giving permission for works," he said.
University of Melbourne urban renewal academic Hao Wu said Amcor and any new owner would face "significant" decontamination works. "Soil testing will be needed to determine what is in there and that will determine what needs to be done," he said.
The revelation follows news that the EPA had ordered Amcor to install waste controls following a leak in June. Industrial waste was discharged from the site into the Yarra River on June 13.
An EPA investigation discovered the company had tried to soak up the oily water leak with absorbent padding.
Tests confirmed the presence of the oily water in the river which the EPA said risked the environment and was preventable.
EPA acting CEO Matt Vincent said industrial companies that worked close to waterways had an obligation to manage their waste.
"EPA has made it clear to Amcor that they will be held to account for the ongoing pollution and environmental issues surrounding their Alphington plant," Mr Vincent said.
During its last months the company must remain vigilant in its operations, especially those that can potentially affect the environment, he said.
Ms Mckellar said the company would work closely with the EPA to "comply with all requirements and meet our obligations".