It is the fifth such announcement in the nation's nuclear energy sector this year. San Onofre's two reactors in California, Kewaunee in Wisconsin and Crystal River 3 in Florida are also being retired.
Vermont Yankee's owner, New Orleans-based Entergy Corp., cited competition from cheap natural gas and high costs tied to regulation as reasons for its decision to close the plant, announced this week.
Natural gas now accounts for more than half of the New England region's net electricity generation.
But the move comes amid an increasingly worsening situation at Japan's Fukushima nuclear power plant which melted down in 2011 following a 9-magnitude earthquake and subsequent tsunami. The Vermont plant features a boiling-water reactor, similar to the reactors that failed at Fukushima.
Vermont Yankee began commercial operation in 1972. In March 2011 -- less than two weeks after the Fukushima disaster -- the Nuclear Regulatory Commission renewed the plant's operating license through 2031.
"This was an agonizing decision and an extremely tough call for us," Leo Denault, Entergy's chairman and chief executive officer, said in a statement Tuesday.
The company said since 2002, it had invested more than $400 million "in the safe and reliable operation" of the facility and "the financial impact of cumulative regulation is especially challenging to a small plant in these market conditions."
Most of the country's nuclear reactors were designed in the 1960s and 1970s.
For example, Southern California Edison chose to close the 45-year-old San Onofre plant in northern San Diego County because of the high cost of repairs needed less than three years after the company invested $780 million in upgrades.
Following a 30-year period in which few new reactors were built, it is expected that four to six new units may come on line by 2020, the World Nuclear Association says.
Mark Cooper, senior fellow for economic analysis at Vermont Law School's Institute for Energy and the Environment told The Wall Street Journal the nation's nuclear industry is in the midst of a "rapid-fire downsizing" as it grapples with the pressure of rising costs and slack revenues.
Julien Dumoulin-Smith, an energy analyst with UBS Financial Services, says more nuclear plant closures are likely to come, citing competition from power plants fired by abundant, cheap natural gas.
"This is likely a bellwether, as far as it goes, for the nuclear industry. In some senses, this is the first -- or perhaps the second -- of a large wave of potential nuclear plant retirements in this country," Dumoulin-Smith told National Public Radio.
Yet Entergy's Denault said the company "remains committed" to nuclear power, noting it is "safe, reliable, carbon-free and contributes to supply diversity and energy security as part of a balanced energy portfolio."
All of Vermont Yankee's 630 employees ultimately will lose their jobs although some will remain on staff for the decommissioning of the plant, Bill Mohl who oversees all of Entergy's nuclear plants in the Northeast, was reported as saying by The Boston Globe.
Entergy has 60 years to decommission the plant, under a plan approved by the NRC.
"We are committed to the safe and reliable operation of Vermont Yankee until shutdown, followed by a safe, orderly and environmentally responsible decommissioning process," Denault said.