A free school put in special measures following a damning Ofsted report is to be closed by the government.
Ofsted inspectors pinpointed particular problems with bullying and poor pupil attitude at Durham Free School.
They also said the school's curriculum was failing to help students understand "British values" or "prepare them for life in modern Britain".
The school said it needed time to "absorb" the announcement but was still supported by parents.
'No prospect of improvement'
Previous free schools to close are the secondary school element of the Al-Madinah school in Derby and the Discovery New School in Crawley.
After a two-day visit in November, Ofsted inspectors rated the school, which is currently advertising for a new head teacher, inadequate in all areas.
Education Secretary Nicky Morgan said children at Durham Free School were being "let down by a catalogue of failures" with no "imminent prospect of improvement".
She said the school was "failing to ensure children are looked after, failing to provide an environment in which children are able to learn and failing to provide the quality of education that we expect".
"We have decided to close the school and will work with the local authority to ensure every child is found a place at another local school where they can thrive and receive the standard of education that they deserve."
Gillian Hargreaves, BBC education correspondent
According to Ofsted, Durham Free School has comprehensively failed in every aspect of school life, from teaching quality to pupil discipline - even though it only opened 18 months ago.
This is the third free school to close since the policy was introduced in 2010. Critics will say this is proof they are an untried experiment playing havoc with children's lives.
But the government points out that schools run by local councils fail too and often languish for years trying to improve. By acting decisively to stop the rot, Nicky Morgan has shown failure in free schools will not be tolerated.
Shadow education secretary Tristram Hunt said the free school programme should be ended.
He said: "David Cameron's failing programme is damaging school standards - too many are failing their Ofsted inspections and a complete lack of local oversight is allowing underperformance in these schools to go unchecked for far too long.
"Labour would end the flawed free schools programme and reverse David Cameron's decision to allow unqualified teachers in our schools."
However, Ms Morgan said it was a "great strength" of the scheme that failing schools could be dealt with promptly.
'Aftershave sprayed in faces'
In their report on Durham Free School, Ofsted inspectors found student achievement was "weak", teaching "inadequate" and marking of pupil's work "inaccurate".
The inspectors said some pupils held prejudiced views of other faiths which were not being challenged by the school.
Behaviour on school buses was also criticised, with the inspectors saying: "Students call each other unpleasant names and there are many instances of bullying.
"There are incidents, for example, of students spraying aftershave into other students' faces, crawling around under seats and failing to use safety belts."
Inspectors noted pupils' attitudes towards learning were "often poor" and, in one lesson, students were speaking among each other, doodling and playing with a box while the teacher was talking, without being challenged over their behaviour,
When recruiting staff, the report said, too much emphasis was placed on applicant's religious background rather than teaching ability.
John Denning, chair of governors at Durham Free School, said the school had heard about Ms Morgan's decision through the media rather than from the Department for Education.
He said: "Parents continue to support the school wholeheartedly for the way it is transforming children's lives and offering families a choice that previously did not exist."
He added that the governors intended to take advice and explore any avenues for appeal.
City of Durham MP Roberta Blackman-Woods (Labour) has previously criticised the cost of the school.
She said: "Everybody's number one priority must now be to make sure that the children are found new school places so they can get on with the quality education they deserve."
The school has 94 pupils, one sixth of whom have some form of special educational need, and last year nearly 18% of students received suspensions.
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