Nottinghamshire County Council will cut its budget for the voluntary sector by £1.8m in the next financial year - a cut of 56 per cent.
The local authority said it was reducing the budget from £3.2m in 2010/11 to £1.4m from April as part of its efforts to save £150m over the next three years.
Martin Suthers, the Conservative deputy leader of the council, said in a statement that the council was making efficiencies across all services.
"The voluntary sector will need to do the same to make the most of the funding that is available to them," he said. "We are in ongoing consultation with the voluntary and community sector on the level of funding available."
Voluntary sector leaders criticised both the scale of the cuts and the way the council had handled the announcement, and said they might ask for a judicial review of the decision.
Alan Lloyd, chief executive of Mansfield Council for Voluntary Services, a local infrastructure body, said that any legal challenge would be based on the fact that the council had not properly followed internal procedures.
"The council didn’t consult properly," he said. "It did not carry out an equality impact assessment. It has now done so retrospectively, but this isn’t acceptable.
"It also consulted online only, which made it difficult for the most disadvantaged people to respond."
He said that a local law firm had already offered pro bono support for any legal challenge.
Kevin Cooper, coordinator of the Nottinghamshire Infrastructure Consortium, said infrastructure bodies had been told they were not eligible to apply for the new round of council funding.
"This was a ragtag process," he said. "The council has not communicated with us at all. It hasn’t given a clear impression of who was and wasn’t eligible for funds.
"It will really hurt the disadvantaged people that our organisations serve."
A council spokesman said there was "ongoing consideration" of the funding of infrastructure bodies.
Nottingham City Council said it would also be cutting funding to the voluntary sector after its Supporting People grant from central government, which allows it to fund groups helping vulnerable people, was cut from £22.3m in 2010/11 to £12.3m next year.
It said further cuts might be announced when its full budget was released later this year.