Sunderland's Toys R Us branch will survive the firm's move to axe 26 stores and hundreds of jobs.
The company's MetroCentre branch is also reprieved while a third North-East shop at Teesside Park, near Stockton, remains open although it could be reduced in size.
The retailer said it is working on a company voluntary agreement (CVA) which would allow it to jettison 26 loss-making stores.
The firm said the transformation plan is needed to "meet the evolving needs of customers in today's UK retail market".
A spokesperson said: "The Toys R Us store at the MetroCentre, Gateshead, will not be closing.
“It is our intention to keep the Toys R Us Store in Teesside open. We are reviewing options including downsizing the store or a rent reduction.
“The pop-up store in Sunderland is not affected by the CVA process.”
It is understood that 500 to 800 jobs could be lost as part of the CVA process.
The retailer said that all efforts will be made to redeploy team members where possible.
Toys R Us, which trades from 84 stores in the UK and has 21 concessions, employs a total of 3,200 people.
But the company assured that there will be "no disruption for customers" throughout the Christmas and New Year shopping period, with the business set to start closing stores in Spring 2018.
Steve Knights, managing director of Toys R Us UK, said the warehouse-style stores opened by the retailer in the 1980s and 1990s have proven "too big and expensive to run", adding that "newer, smaller, more interactive stores in the right shopping locations" were trading well.
He also pointed to a "significant growth" in online sales and its click-and-collect offering.
"Like many UK retailers in today's market environment, we need to transform our business so that we have a platform that can better meet customers' evolving needs.
"The decision to propose this CVA was a difficult one, but we determined it is the best path forward to make essential changes to the business," Mr Knights said.
As part of the CVA process, Toys R Us UK has submitted its restructuring plan to creditors, with hopes of gaining approval within the next 17 days.
If approved, Toys R Us UK would see its rental obligations "substantially reduce", and allow it to move forward with a "new, viable business model" that would include a raft of store closures.
The announcement comes just months after the US-based retailer filed for bankruptcy protection in the US and Canada as it battled mammoth debts and increasing competition online.