Britain's top Olympic and Paralympic athletes will have a 29 per cent increase in government funding over the next five years instead of the feared cut.
The Department of Culture, Media and Sport will suffer a cut in real terms of five per cent as it, along with other under-pressure Government departments, are told to make efficiency savings.
But funding for elite athletes - via UK Sport - will receive a significant boost in the run up to the 2020 Olympics in Tokyo.
Around a third of UK Sport's funding comes from the Government, with the rest coming from the National Lottery.
The funding announced on Wednesday means UK Sport should see its annual income rise from £135m to around £148m in the years leading up to Tokyo.
Chancellor George Osborne's spending review states: "The Government is increasing its funding for elite sport to build on the success of the Olympic and Paralympic games at London 2012 and support Team GB's ambition for success in Rio 2016 and Tokyo 2020."
The Government will also support bids to host two other major sports events.
The review adds: "Following the success of hosting London 2012 and the rugby union World Cup the government will support the ambition to host the cycling road world championships and 2021 rugby league World Cup in the Northern Powerhouse."
Funding for grassroots sport and UK Anti-Doping is likely to be broadly unchanged.
Sports Minister Tracey Crouch said: "This settlement recognises the wider value of sport in society and how it plays an important role in boosting the economy.
"The increase in funding will support our elite athletes in the run up to the Tokyo 2020 Olympic and Paralympic Games, grow the grassroots to get more people involved in sport and promote clean sport in the UK and beyond."
Rod Carr, Chair of UK Sport, said: "We welcome the Chancellor's Spending Review announcement today which included an increase in Exchequer funding recognising the outstanding performance of our Olympic and Paralympic athletes in delivering those amazing medal moments."
Helen Griffiths, chief executive of Fields In Trust, expressed concern about the funding cut but is pleased Lottery funding has been protected.
"We're very disappointed to see a 20 per cent decrease in DCMS' budget and how that will actually play out we're not really sure at the moment," she said.
"The decrease will undoubtedly have an effect on grass roots sport and in the coming days we'll find out more information.
"It's heartening to hear that the Lottery funding will be protected because they are the primary funders of a lot of sport at community level.
"More than £39m has been invested in those projects and a lot of them are around the £10,000; a lot of them have been around community level so we're pleased that has been protected."