Rt Rev John Pritchard currently lives in a house owned by the University of Oxford's Wolfson College on Linton Road, Summertown.
The house was built in 1996 and is made from Cotswold stone. It is set in landscape gardens and has an orangery (a conservatory for growing oranges), an annexe and a detached two-bedroom gated lodge.
A cheap rent agreement between Wolfson College and the Diocese of Oxford for the house was set up more than 30 years ago, having always been due to finish after the incumbent Bishop John retires.
It is currently unclear why the cheap rent agreement wasn't extended further.
David Mason, head of buildings for the diocese of Oxford, says Wolfson has been letting the Church have the house for "peppercorn rent" for decades.
Sarah Meyrick, strategic advisor for the Diocese, told local newspaper the Oxford Mail: "The bishop has done a huge amount of entertaining in Linton Road and it's sad that will no longer be possible in that place."
Bishop John is due to retire at the end of this month, prompting the diocese of Oxford to buy a home just outside the city, in Kidlington, for £1.7m.
Part of the requirements for the house are that it has five bedrooms, a dining room and a garden.
This new home will house future bishops of Oxford.
A new bishop hasn't been appointed yet to replace Mr Pritchard.