MPs have warned that local news outlets will struggle to survive without more support from the government.
A report by a House of Commons committee has warned that a decline in local reporting would damage democracy.
While some local publishers have shown "encouraging examples of innovation", larger ones are "compromising the quality" of their journalism, it said.
The Digital, Culture, Media and Sport (DCMS) committee also called on the BBC to reconsider cuts to local radio.
The report said the plans for BBC stations to merge some programmes - part of the corporation's digital first strategy - would "dilute the sense of localness".
It also concluded that while some local print publications had successfully adapted to the digital era, others had struggled and in some cases had to close down due to declining advertising revenues.
It recommended making it easier for smaller titles to achieve charitable status, and for the government to encourage more philanthropic funding of local journalism.
'Ripped a hole in the heart of communities'
Damian Green MP, acting chairman of the cross-party committee, said: "The disappearance of local news providers, which have always acted as the eyes and ears of their readers and held local decision-makers to account, has ripped a hole in the heart of many communities.
"Worryingly it is the most deprived areas of the country that are most likely to miss out on coverage, compounding the disadvantages they already face."
The committee called for an audit of the public money used to support local journalism, and an "analysis of whether this money can be more fairly distributed and better used to promote innovation".
But it raised concerns that the biggest commercial owners of local and regional titles often benefit disproportionately.
The National Union of Journalists (NUJ) welcomed the committee's call for a long-term fund rewarding innovative public interest news.
Assistant general secretary Seamus Dooley said the union "shares many of the MPs' concerns over the threats to the quality and coverage of local news".
"The report's proposals are very welcome, and the emphasis on smaller publishers is especially appreciated," he added.
Maria Breslin, editor of the Liverpool Echo, meanwhile, criticised the report's "lazy and perhaps even harmful judgement about the quality of local news" having dropped in recent times.
She told the Press Gazette: "The Echo continues to sit at the heart of our community, read by almost half of all adults in Liverpool every month, and to tell the stories that our readers both want and need."