The Woodcraft Folk are celebrating their 80th anniversary this year, but have been told by the Department for Education and Skills that their annual grant of pound;52,000 will not be renewed.
Around 9,000 young people belong to the organisation and Woodcraft Folk members have marched in support of the Campaign for Nuclear Disarmament in the 1960s and against the war in Iraq in 2003.
Andy Piercy, Woodcraft Folk general secretary, said: "We are often critical of government policies. My first reaction was that the withdrawal of funds was a political statement."
The Woodcraft Folk have adopted many of the principles of the women's movement and linked the group's own interest in camping and hiking with the ecology movement during the past four decades.
The organisation has received a government grant since the Sixties and the cash, which would have covered the years 2005-8, represented about 20 per cent of its income. It has five paid members of staff and 3,000 volunteers.
Mr Piercy said: "The Government urges people to be good citizens and volunteers. That's at the heart of what we do. So this is a very sad situation."
A DfES letter, sent from its Youth Services Unit, explains that it had received 159 bids, totalling more than pound;44 million, for a pound;21m grant.
The letter says: "We are unable to fund everyone who applied ... We have assessed all the bids and have awarded grants to those organisations which have clearly demonstrated the outcomes and quality the scheme requires."
Linda Osborn, who has run south London groups for more than 30 years, said:
"We've produced educational materials that are now used in schools. Our reach far outweighs our membership. How anyone can say we're not value for money is mind-boggling."
Tom Berwick, 15, from south-east London, said Woodcraft Folk members cannot simply join Scout and Guide troops instead. "At our meetings, you don't wear uniforms, and no one shouts at you," he said. "Everyone's friendly and no one hates you. You can just relax."