London Councils' grants committee is recommending that the London Borough Grants Scheme is cut by £16.8m, bringing the total pot to £9.8m.
The committee said money contributed by London boroughs to the scheme can be more effectively spent by the councils themselves.
Among the 200 charities and voluntary groups affected by the recommendation are 21 children and young people's organisations, which are set to lose combined annual funding of £1.3m.
The London Voluntary Service Council (LVSC) and the Voluntary Sector Forum network said the cuts are disproportionate and will affect the poorest Londoners and most disadvantaged children.
The charity bodies want to see any "repatriated funds" ringfenced by councils for the charity sector.
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