A freedom of information request to local authorities by the Pre-school Learning Alliance found that 28 per cent of council areas that responded to a survey said their average local early years funding rates for private and voluntary providers had risen by less than the rate of inflation, a real-terms cut, between 2012/13 and 2017/18.
Of the 352 local authorities in England that were approached, 112 responded, with 31 declaring that rates had risen by less than the rate of inflation over the five-year period of 7.6 per cent.
A total of six councils reported a fall in their rates over the period even before inflation was taken into account.
Details of real-terms funding rate falls come despite the government announcing additional childcare funding of £1bn in 2015, including £300m from April 2017 to increase the average hourly rate childcare providers receive from local authorities.
Free childcare entitlement for three- and four-year-olds is set to be doubled from 15 to 30 hours a week from September.
Pre-school Learning Alliance chief executive Neil Leitch said the results illustrated why nurseries, pre-schools and childminders across the country are "closing down as a result of underfunding".
"With the nationwide launch of the 30-hour offer just a few months away, and many childcare providers increasingly uncertain as to whether they will offer many - if any - places, clearly something has to give," Leitch said.
"The government cannot simply go on pretending that all is fine and that there is no issue with funding. For many years now, so-called ‘free childcare' has in reality relied on a combination of the goodwill of providers and parents paying above the odds for non-funded hours. This cannot continue."
Leitch's warnings were backed by the National Day Nurseries Association (NDNA) chief executive Purnima Tanuku, who said the research confirmed NDNA's own findings "that funding is not keeping pace with inflation and rising business costs".
"The government has fallen far short of the step change in funding that is needed and this situation will only worsen as the costs associated with the National Living Wage continue to increase," she said.
"Chronic underfunding must stop - it's time that ‘free' nursery hours are truly free and not subsidised by nurseries."
Professional Association for Childcare and Early Years (Pacey) chief executive Liz Bayram said childminders faced an average shortfall of £400 a year for every funded place they offered once the 30 hours entitlement was introduced.
"Pacey's own recent research highlights that if childminders purely offered funded places for two-, three- and four-year-olds, many would soon face closure due to low fee levels in many local authorities," she said.
"We know most of our members are on very low incomes and by offering just one funded place they could face a loss of £400 per year, which is significant.
"While some local authorities' hourly rates do cover the full cost of delivering a place, in others the shortfall will have to be made up through supplements or by charging for lunch and other extras."
The Department for Education has been contacted for comment.