County councillor Charmian Sheppard, the portfolio holder for education, said the council would maintain transport for those who already had it, but all new children would be assessed against a new policy framework.
The council said it would have to cut costs to reduce its budget deficit.
Last year it overspent its schools' transport budget by 531,000 and it predicts an 800,000 overspend for 2003/4.
This week it will consider proposals to change procedures for transporting special needs pupils to school.
"Most children who have special educational needs and receive free transport do so under discretionary polices.
"It is important to emphasise that having special educational needs or attending a special facility does not convey an automatic right to free transport," states the proposals.
Proposed changes mean that pre-school children and special needs children living within the statutory school walking distance will no longer be entitled to free transport.
Local authorities have a legal responsibility to provide free transport for children if the walking distance to their school is more than three miles, or two miles for children under eight.
Liz Rook, head teacher at Battledown Children's Centre, a specialist early years centre that would be affected by the proposals, said: "Free school transport is absolutely critical because our county is so rural.
The policy will deny children the right to early intervention, which the Government says is so important. Children in isolated areas need special help that can't be accessed in local playgroups."
Cheltenham Borough councillor Paul McLain, whose ward contains one of the special schools that would be affected, believed the proposals formed part of a bigger agenda.
"Two special schools have already been closed in the area and another four or five are facing the axe.
"It is part of a plan to wind down special schools and work for integration into the mainstream," he said.
He believed that the council should provide free transport for all special needs children, even if they lived within statutory walking distance of the school.
"The proposals will stop special educational needs pupils getting to school. Having a special needs child is no respecter of family income. Some families can afford to pay for transport but others on benefits scrabble to put food on the table.
"Early intervention should be encouraged and leads to cost savings in the long run."
Last week the Government published the draft school transport bill, which contains proposals to allow 20 local authorities to pilot projects to cut car use.
