The channel will continue online with many of its programmes set to be available to watch on the BBC iPlayer. However the range of shows created will be dramatically cut back.
News of the move has attracted criticism from some well known faces, many of whom have created content for the channel including Matt Lucas and Jack Whitehall.
The news means that the future of arts and culture channel, BBC4, is secure after there had been calls for it to be merged into BBC2.
In a speech last week Hall said some “hard decisions” had to be made and that the BBC had to change. He had ruled out making smaller reductions in budgets across the organisations.
The channel launched in 2003 and was the original home of shows such as Little Britain and Being Human.
His plans have yet to be approved by the BBC Trust.