The Learning and Skills Council assumes responsibility for school sixth-form funding from April and will channel more than pound;1.2 billion to schools via local education authorities.
The cash is part of a pound;1.35bn package for school sixth-formers. Local authorities also receive nearly pound;140m for pupils with statements of special needs.
Allocations for sixth forms are based on September 2001 pupil numbers and qualifications.
Councils will not be able to use any of the money for any other purpose. But funding for sixth forms is not ring-fenced at school level meaning headteachers will be able to use the money as they like.
Alan Parker, president of the Society of Education Officers, said any extra money for sixth forms will have to come from other parts of council budgets.This means that other schools will be subsidising them, he said.
Ministers guaranteed that no sixth form would be worse off in real terms as a result of the Learning and Skills Council taking over funding.
They also came up with top-up funding to make sure no local authority loses out overall.
David Hart, general secretary of the National Association of Head Teachers, said that heads were disappointed that the cash was being staggered over three years.
"Schools find this incredibly frustrating at a time when they are being asked to deliver Curriculum 2000 and post-16 reforms which are resulting in quite significant additional costs," he added.
John Bangs, education secretary of the National Union of Teachers, warned:
"Whenever you change the funding mechanism you get winners and losers."