  The tensionless limit of gauged WZW models arises when the level of the
underlying Kac-Moody algebra assumes its critical value, equal to the dual
Coxeter number, in which case the central charge of the Virasoro algebra
becomes infinite. We examine this limit from the world-sheet and target space
viewpoint and show that gravity decouples naturally from the spectrum. Using
the two-dimensional black-hole coset SL(2,R)_k/U(1) as illustrative example, we
find for k=2 that the world-sheet symmetry is described by a truncated version
of W_{\infty} generated by chiral fields with integer spin s \geq 3, whereas
the Virasoro algebra becomes abelian and it can be consistently factored out.
The geometry of target space looks like an infinitely curved hyperboloid, which
invalidates the effective field theory description and conformal invariance can
no longer be used to yield reliable space-time interpretation. We also compare
our results with the null gauging of WZW models, which correspond to infinite
boost in target space and they describe the Liouville mode that decouples in
the tensionless limit. A formal BRST analysis of the world-sheet symmetry
suggests that the central charge of all higher spin generators should be fixed
to a critical value, which is not seen by the contracted Virasoro symmetry.
Generalizations to higher dimensional coset models are also briefly discussed
in the tensionless limit, where similar observations are made.
