Caerleon-born Machen, who died in 1947, is known for his story The Bowmen, set in World War One, which gave rise to the legend of the Angels of Mons.
Newport council is consulting on budget plans that could see the library shut.
A spokesman said it would relocate the reference library if the building shut but no decisions have been made.
The Friends of Arthur Machen literary society said its members, who include comedian Stewart Lee, actor Barry Humphries and writer Alan Moore, are writing to the local authority.
Friends' founding member Godrey Brangham said: "This obviously is of great concern regarding the Machen collection in the reference library."
Friends' chairman Ray Russell said: "Newport holds the finest public Machen collection in the UK.
"We'd like them to preserve it, develop it, and keep access to it open.
"Arthur Machen was a local son of Gwent who won worldwide literary fame, and it is hoped that Newport will continue to honour his work."
Arthur Machen 1863-1947
•Born 150 years ago in Caerleon, south Wales
•Fantasy and horror writer
•Works include early self-published book Eleusina, The Great God Pan and The Three Imposters
•Fans include Stephen King, Mick Jagger and Rowan Williams
•His portrait is in the National Museum Wales
More about the first modern horror writer
The leader of the council has met with the group, and a spokesman said: "If the proposal to close the central library building did go ahead then the council would consider where the best possible place to relocate the reference library would be."
The consultation on the council's budget savings proposals continues until 16 January 2015.
Fans of horror writer Arthur Machen have called on Newport council to protect the collection of his books and papers at the city's central library.