The charity Booktrust is to lose all its government funding for schemes that promote reading by providing free books to children in England.
The charity said it was "immensely surprised and disappointed" to hear it would lose £13m of annual Department for Education funding from April 2011.
The money was used for programmes which provide book packs to babies and primary school children in England.
The government said difficult economic times required tough decisions.
The schemes in question are:
- Bookstart, under which every baby in the UK receives a free pack of books - programmes in England will be affected
- Booktime, which provides further packs for children as they start primary school
- Booked Up, which enables all year 7 pupils in England to choose a free book.
In combination, the programmes send out 3.5 million book packs every year, the charity says.
The schemes are supported by publishing companies, and Booktrust says that means it can generate £4 of value for every £1 of government money.
It says the schemes are universal, even for families that can afford to buy books, because it is difficult to establish targeted programmes that effectively reach all families that most need them.
It also says families from all socio-economic backgrounds benefit from being encouraged to spend time reading together, which is one of the programme's main messages.
The charity said it would be consulting its partners and exploring alternative funding opportunities.
"We are immensely surprised and disappointed by this decision and know that families, teachers, librarians, health visitors, our publishing partners and many others up and down the country will be sharing these feelings," Booktrust said in a statement.
Chief executive Viv Bird said the programmes provided "exceptional value for money".
"We were quite prepared to take our share of the cuts but 100% cuts to programmes that contribute to literacy, at a time when literacy is a matter of government concern, seems to be a rather strange, short-sighted decision," she said.
In a blog posting, children's author Alan Gibbons compared Education Secretary Michael Gove to the Dickens character Scrooge.
"By what distorted logic could he think the pulling of funds to Booktrust is sensible or cost effective?," he asked.
Mr Gibbons, winner of the 2000 Blue Peter Book Award for Shadow of the Minotaur, noted recent figures that showed 9% of boys entered secondary school with reading levels of the standard expected of seven-year-olds.
Mr Gibbons also pointed to the OECD's PISA report, published this month, that showed the UK slipping in international education rankings and said too few children were reading for pleasure.
A Department for Education spokesman said: "We believe that homes should be places that inspire a love of books and reading.
"While we appreciate that some families will need to be supported if they are to provide this kind of environment, in these difficult economic times, ministers have to take tough decisions on spending.
"We hope that book gifting schemes will continue to benefit from support from UK publishers," the spokesman added.
Labour leader Ed Miliband said: "This Conservative-led government knows the price of everything and the value of nothing.
"The abolition of Bookstart will deprive children of an early opportunity to discover the joy of reading.
"It is one of the programmes introduced by Labour of which I am most proud. It was a gift from the government to the next generation."