The head of Sport England has told ITV News organisations like the Football Association need to deliver better results or they will continue to lose funding.
Jennie Price said the FA had to work harder to encourage participation in informal football, rather than putting all its efforts into the 11-a-side game.
The Football Association says it is "disappointing" that Sport England has decided to reduce its funding by £1.6m.
FA general secretary Alex Horne said the move was particularly unwelcome as problems in grassroots football are now "acute".
He also criticised the timing of the decision, saying:
“It is especially disappointing as Sport England agreed and began funding our joint plan only in August last year, and today’s decision is based on measurement undertaken just two months later in October."
However, the FA vowed to continue to invest in grassroots football, on which it spends around £1m a week.
The governing bodies of football, golf and rowing have seen their funding cut after an announcement from Sport England.
The Football Association was the biggest loser, with its fund reduced by £1.6m.
Sport England said the move was because each sport had 'seen the number of people who play their sport regularly fall'.
They added that the sports' authorities needed to make 'significant' changes to attract more participants.
The money taken away from the governing bodies will still be invested in the same sports through bodies like local authorities and charities.
1.7 million fewer women are taking part in sport than men, despite the success of female athletes in Team GB at the 2012 Olympics, according to Sport England.
The organisation has raised concerns women were lagging behind, as nearly 6.8 million women play sport at least once a week versus 8.5 million men.
A further 12 million women wanted to take part in more physical activity than they currently were able to, they said.
The culture, media and sport select committee is meeting to discuss how to get more women playing sport with minister for sport Helen Grant later today.