Arts Council England (ACE) will have its funding cut by a further £11.6m before 2015, the Department for Culture, Media and Sport has announced.
This is on top of reductions already announced in the government's 2010 spending review, which saw the ACE budget slashed by almost 30%.
In last week's Autumn Statement, the DCMS took on a 1% cut next year and 2% in 2014/15.
ACE chief executive Alan Davey called the situation "extremely challenging".
However, writing in a blog post today, the culture secretary Maria Miller said DCMS budgets must not be given "special protection".
She added that the savings the department must make, although "painful" are "considerably less" than the 5% cuts predicted.
"Our resource budgets, that's the money that goes towards day-to-day running costs for all the bodies we support, the money that makes them tick, if you prefer, will reduce by one per cent in 2013/14 and two per cent in 2014/15."
That amounts to savings of £3.9m from 2013 to 2014 and £7.7m the following year.
The next spending review is scheduled for the first half of next year, amid fears that there could be further cuts.
It is not yet clear how ACE will implement the cuts on the arts organisations it funds.
Mr Davey explained: "What is clear is that our grant in aid budgets for national portfolio organisations and museum activity will reduce by 1% and 2%.
"We must now look closely at the figures and decide how we will pass these cuts on. Some organisations are also having to deal with local authority cuts and so the situation is extremely challenging."
Last month, Ms Miller hit back at criticism from senior arts figures over cuts to arts budgets, saying claims the government "neither likes nor supports the arts are disingenuous in the extreme".
She was responding to attacks on government policy made at the London Evening Standard Theatre Awards.
Among those to speak out were National Theatre boss Sir Nicholas Hytner, actor Stephen Fry and directors Danny Boyle and Stephen Daldry.