Warburtons will work with union representatives over the 90-day consultation period to explore options for the 114 affected staff, including job opportunities at its other bakeries, voluntary redundancy and early retirement, said commercial director, Jason Uttley.
"We are committed to working closely with our employees and their representatives to discuss the proposal and to explore all possible options during the consultation period.
"As for our strong customer base in Wales, we remain committed to providing the same high standards of quality of product and service."
The firm, which opened a £45m state-of-the-art bakery in Bristol in December 2008, said the bread market in the south west had not grown in line with its estimates.
'Category demand has not grown in line with expectations and therefore we have had to conduct a review of capacity across the business.
'This review has included an investigation into which bakeries have surplus capacity . Unforunately this has led to the proposal to close Newport bakery.'
The Newport and Bristol bakeries are both managed by David Williams.
Warburtons acquired the Newport site in 2005 and started manufacturing bread from there in 2006.