East Devon District Council listed the pub after receiving a request from Save The Red Lion Campaign. It is only the second time the authority has granted such a listing.
It means locals have six months to raise funds to purchase the property, otherwise it may be sold onto a developer.
Campaign chair Fred Burnett said: “This is marvellous news! The fact that East Devon District Council has responded so positively and swiftly to our request shows the importance that it attaches to the campaign’s aim of retaining the pub at the heart of the village.
“I am confident that if the business plan reflects the needs of the local community then local people will feel confident in investing in this potentially exciting venture.”
The campaign was launched in May 2013 after owner Punch Taverns placed the Red Lion, the only pub in the village of Sidbury, up for sale.
John Loudoun, the campaign’s secretary, said the group had enlisted the help of expert advisers to develop a viable business plan for the pub.
The campaign’s patron Hugo Swire MP welcomed the Council’s decision and wished the campaign “all the best” in its attempts to purchase the pub for the local community.
“Pubs like the Red Lion are vitally important to keeping villages alive. I look forward to having my first pint what I hope will be the first community owned pub in East Devon,” he said.