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But now the controversial station is being given a new lease on life. Under a recent deal, Russia has agreed to help build a new reactor unit for Metzamor that will extend its life by decades.
Armenian authorities insist that the resource-poor country, which relies on Metzamor for 40 percent of its electricity needs, has no choice but to keep the plant alive.
Local environmentalists, however, are calling on the government to drop the plan, saying the risk of a nuclear accident so close to the capital is too high.
"Those who are deciding to build a nuclear power station in such a place are simply not thinking about the future of the Armenian people and don't realise the catastrophic consequences it could have," said Hakob Sanasarian, the chairman of the Yerevan-based Green Union environmental group.
Launched in 1976, the Metzamor plant featured two VVER nuclear reactors, a design that continues to be used throughout the former Soviet Union and eastern Europe.
The plant was shut down in 1988 following the Spitak earthquake in Armenia, which killed 25,000 people and caused widespread devastation. But Armenian authorities restarted one reactor unit at the plant in 1993 following energy shortages that were causing heavy deforestation.
Suffering from an economic blockade imposed by neighbours Turkey and Azerbaijan over its support for ethnic Armenian separatists in Azerbaijan's breakaway Nagorny Karabakh region, Armenia also needed to restart the plant to generate much-needed revenues from electricity exports.
Concerned over the plant's high-risk location and ageing facilities, the European Union in 2004 offered to provide 100 million euros (135 million dollars) in compensatory aid if Yerevan agreed to shut down the reactor.
Authorities have instead decided to upgrade the facility, approving the construction of the new 1,060-megawatt reactor unit at an expected cost of up to five billion dollars (3.7 billion euros).
Armenia signed an agreement with Russia to form a joint venture to build the unit during a visit by President Dmitry Medvedev in August and construction is expected to begin next year.
"For a country like Armenia, which has no great energy resources such as oil and gas but does have an education in producing nuclear power, atomic energy is the best solution," Energy Minister Armen Movsisian told AFP.
He said the reactor, based on a design similar to other reactors being built in China and India, would meet the latest safety standards and have a service-life of 60 years.
Environmentalist Sanasarian, however, said the government is being short-sighted and should instead be focusing on alternative energy sources such as solar and wind power.
"The territory (where the plant is located) is like a broken plate," he said, adding that there are five tectonic faults near Metzamor. "This is the worst place you could put a nuclear power station."
Aside from the danger of potential earthquakes, critics have also raised concerns about the environmental effects of launching the new reactor and have accused the government of failing to provide full information about its impact.
"We have never received answers from the government," said Inga Zarafian of environmental group Ecolur.
"From where will they take the huge amounts of water needed for the reactor to work at such capacity? Where will the nuclear waste be buried? What will they do with the old plant?"
On the streets of Yerevan, residents said they had mixed feelings about keeping the plant alive. Many were worried about the risks it posed but also said they had no desire to return to the power shortages of the early 1990s, when Yerevan often had electricity for only an hour or two per day.
"We all live in constant fear since there is always the danger of an earthquake and of course there is a huge risk from the nuclear station," said Ashot Sagatelian, a 53-year-old shop owner.
"But what are we supposed to do if we have no other source of energy? My children grew up in the darkness and cold of the nineties.... It was a complete nightmare."
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