The former Australian of the Year set up the foundation in 2021 - the year she carried the national honour for her advocacy for abuse survivors and for law reform.
In a social media post on Thursday, the foundation said it had reached a crossroads.
"Like many small advocacy organisations, sustaining long-term funding for this work has become increasingly challenging," it said.
"After careful consideration, the board has made the decision to close the foundation, with the process to be finalised in the coming weeks."
Ms Tame was able to speak publicly about her childhood sexual abuse after pushing for law changes in her home state Tasmania in a campaign that began in 2018.
"We helped shift the national conversation by putting safeguarding children firmly in the public spotlight - even when it was uncomfortable or costly," the foundation said.
"Thanks to our campaign efforts, every jurisdiction in Australia has stopped naming the crime of 'persistent child sexual abuse' as a 'relationship'."
Ms Tame in March said she had lost speaking engagements because of a media "smear campaign" against her.
Her comments came several weeks after the Australian Jewish Association tried to have her appearance at an event cancelled, after she led a chant of "globalise the intifada" in Sydney.
The foundation had four board members including Ms Tame and had more than 48,000 followers on social media platform Instagram.
Ms Tame was named in 2021 as one of Time magazine's next generation leaders.
The foundation said it had helped push for the harmonisation of survivor identification laws across Australia, advocate for anti-grooming education and had supported hundreds of survivors seeking justice.
"None of this would have been possible without Grace's fierce and uncompromising advocacy for survivors," it said.
"(As well as) her determination to ensure the experiences of those harmed as children could no longer be ignored."
Ms Tame was abused as a teenager by her high school teacher Nicolaas Ockert Bester, who served jail time and is currently before the courts accused of harassing her on social media.
1800 RESPECT (1800 737 732)
National Sexual Abuse and Redress Support Service 1800 211 028
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