Wave power technology firm Pelamis has called in administrators KPMG after failing to secure development funding.
The Edinburgh-based firm has been testing its wave energy converters at the European Marine Energy Centre (EMEC) in Orkney for a number of years.
But in a statement Pelamis said it had "reluctantly" moved to appoint an administrator.
KPMG said it was seeking a buyer who could protect the business and its 56 employees.
In 2012, the inventor of the Pelamis wave energy device, Dr Richard Yemm, won the annual Saltire Prize Medal for his outstanding contribution to the development of the marine renewables sector.
Announcing the administration move, the company said: "The directors of Pelamis regret to announce that they have been unable to secure the additional funding required for further development of the company's market-leading wave energy technology.
"Pelamis is the world's most advanced wave energy technology company.
"It recently received a strong endorsement of this leading position from independent consultants following a series of due diligence exercises.
"This work included detailed assessments of the onward commercial viability of the technology and designs.
"The combination of over 350 man-years of experience in the team, some 15,000 hours of real grid connected test data and intensive parallel R&D work gives Pelamis a unique platform from which to develop and demonstrate the viability of its technology for commercial deployment at scale."
It added: "The directors and employees of Pelamis are dedicated to the success of this revolutionary technology, and are committed to working with the administrator when appointed, the Scottish and UK governments and any future partners to ensure its success."
Last year, German power giant E.On announced it was pulling out of a marine energy research project involving Pelamis in Orkney.
E.On blamed the decision on delays in the development of wave energy technology.
Pelamis said at the time the move would not affect its plans to begin generating electricity on a commercial scale.
The company continued to work with Scottish Power Renewables on the development of its P2 wave energy device at EMEC.
Blair Nimmo, joint administrator and head of restructuring at KPMG in Scotland, said: "Unfortunately the business has been unsuccessful in its attempts to secure the necessary funding to allow it continue its development.
"We will do everything we can to seek a buyer who may be able to protect the business, its skilled workforce and see the continuation of the groundbreaking advances Pelamis has made towards renewable energy production."
A Scottish government spokesman said: "This is a sad day for Pelamis and an anxious time for employees and their families.
"Clearly the news that PWP has gone into administration is a matter of real regret. Scottish Enterprise and Scottish government have been working closely with the company and its shareholders to try and find a way forward and help support the company in its current form.
"The Scottish government stands ready to engage with the company and we will support affected employees through our initiative for responding to redundancy situations Partnership Action for Continuing Employment (PACE).
"Early stage technologies such as this can be difficult, but the development of wave energy has been blighted by the uncertainty facing the energy sector more widely, following reforms of the UK's electricity market. Our belief in the future success of wave energy is undiminished."
Industry body Scottish Renewables said the announcement showed "both the challenging conditions in which this sector operates and the risks inherent in developing new technology".
Senior policy manager Lindsay Leask added: "Pelamis Wave Power's contribution to this emerging industry has helped cement Scotland's position as a global leader, and it is important to remember that the prize from the eventual commercialisation of wave energy remains hugely significant."
Gina Hanrahan of environmental group WWF Scotland said: "Marine renewables have the potential to play an important role in our future electricity mix, helping to cut climate emissions and deliver investment and jobs around our coastline. Harnessing the power of the waves is a challenge we must rise to if we're to wean ourselves off fossil fuels.
"With over 10% of Europe's wave power potential and some of the technology's leading innovators and companies, Scotland is well placed to deliver wave power commercially in the coming years."
The European Marine Energy Centre said it was "saddened" to hear that its oldest customer had gone into administration.
EMEC managing director Neil Kermode said: "As a Scottish world leader Pelamis have been one of the icons of the marine renewables industry, so we are absolutely gutted at this setback.
"It is all the more galling when we know that marine energy has the potential to be a major supplier of power to the UK.
"But just like anybody who has been to sea, we know how hard it is out there, and trying to build a new power source was never going to be easy."
He added: "Today's announcement is undoubtedly a big setback in the mission to learn how to harvest energy from the sea, but the prize is still there."