The National Library of Wales is appealing for money from the public to dampen the effect of a cut to its grant from the Welsh government.
Chief executive and librarian Aled Gruffydd Jones has written to the Aberystwyth institution's supporters warning of the consequences of cuts.
He said the library faced a £1.2m income reduction over two years.
The Welsh government said it had helped foot the bill for repairs following a major fire in April.
But its annual grant of £10m will be reduced by 2% in 2014 and 2015 while National Insurance costs will rise by 3%.
The library's trustees will discuss a strategic plan to deal with cutbacks in February.
Mr Jones said: "If salaries remain frozen as they have since 2009 the library faces a reduction in income of 7% in the coming two years.
"In real terms, factoring in anticipated levels of inflation, we expect a reduction in revenue income of about £1.2m over the next two years."
Mr Jones outlined his fears in an annual letter to the institution's financial supporters asking them to continue to back the public body.
He said: "While reductions in staff cannot be avoided in such circumstances, no firm plans have yet been agreed.
"Much depends on the final form of the strategic plan which will be considered by the board of trustees on 21 February. "
He added that an offer had already been made to staff to apply for voluntary redundancy and early retirement as part of the library's plans for balancing the budget.
A Welsh government spokesperson said: "We value the important work of the National Library in collecting, preserving and providing access to our cultural heritage and have recently provided nearly £4.5m to assist with repairs caused by the fire, and also to support their proposed digital preservation and conservation project."