Minutes of board-level discussions reveal that the inspectorate has been told by the Department for Education to make savings of £38m over the four-year period to 2019/20.
Ofsted's budget for the current 2015/16 financial year is £142.8m, meaning the £38m cut will represent a 26.6 per cent drop in funding over the period.
News of the substantial cut comes amid concern within the organisation about pressure on resources.
In October, CYP Now revealed that the inspectorate is struggling to complete inspections of all local authority children's services departments to schedule because it is "significantly under-resourced against agreed budgets".
In the first two years of the three-year inspection cycle a total of 70 inspection reports were published - making up 46 per cent of the total.
Earlier this year Education Secretary Nicky Morgan granted a request to extend the cycle by around five months - to 31 March 2017.
Minutes of board-level discussions reveal that the inspectorate has also reduced the number of inspectors taking part in inspections to ease pressure on resources.
Ofsted has been contacted for comment.