The new decision means that London's Bush and Orange Tree theatres and the South West's Bristol Old Vic and Northcott theatres will be reprieved from having their funding cut.
The announcement follows a five-week appeal period and a high-profile campaign against the cuts.
In December ACE informed 194 organizations that their funding would be either cut completely or drastically reduced. Of those, 126 appealed the decisions resulting in revised funding plans for 17 organizations, including the under-threat National Student Drama Festival.
But this still means that 185 organizations will not have their funding renewed and 27 organizations will have their funding reduced.
Total funding for the next three years amounts to £1.3 billion (about $2.6 billion) handed out to a total of 888 arts organizations. Of those, North London's recently revamped Roundhouse, which is to host the Royal Shakespeare Company's history plays in April and May, has received an increase of £400,000, ACE's biggest increase in cash terms. The row began when ACE sent out pre-Christmas letters informing organizations of the cuts. The furor reached its height during a meeting convened by the actor's union Equity during which the council's outgoing chief executive, Peter Hewitt, was grilled by some of the UK's most famous stars, as well as many lesser-known performers.
Present were Ian McKellen, Jonathan Pryce and Kevin Spacey, who is soon to appear at the nearby Old Vic Theatre with Jeff Goldblum in a revival of Speed-the-Plow.
The under-fire Hewitt defended the decisions by pointing out that 75 percent of the 990 organizations which received regular funding from the Arts Council will have an increase.