However, the Northern Ireland Office was coming under increasing pressure to reverse its previous refusal to provide funding for the school from a lobby including the Dublin government, co-authors of the Framework Document.
Until now the Department has refused to give official recognition to any independent secondary school with fewer than 300 pupils. The school, Meanscoil Feirste in west Belfast, has just 100 children at present.
The Department has accepted projections from the school showing it will reach the target figure in the next three to four years, and it is allocating the money as "special financial assistance" through the Making Belfast Work scheme.
Under the same interpretation other schools in the province, including Reverend Ian Paisley's Free Presbyterian Schools, could also receive funding.
The Irish language organisation Bored Na Gaeilge hailed the announcement as a "major breakthrough" but Sinn Fein president Gerry Adams was critical of what he called the Government's "backdoor" methods of reaching the decision.
Dick Spring, the Dublin deputy premier welcomed the move, but said he hoped the Department of Education would help the school directly in the future.
Secretary of State Sir Patrick Mayhew said he had been impressed by the education standards at the school but a heavy financial and physical personal burden was being borne by parents and supporters, many from areas of marked disadvantage, to keep the school going.
Mr Adams said the decision fell short of full recognition and continued the second-class treatment of Irish language education in the six counties.
The Ultseh Trust, a cross-community language organisation, welcomed the decision but called for long-term funding for all-Irish schools in the province.