The government contract with one of the largest training companies in the UK, Learndirect, is to be gradually wound up over concerns about standards.
A damning Ofsted report will be published on Thursday after the company failed to block it in the courts.
The Department for Education has now announced it will withdraw all funding from the company by July 2018 and has stopped it taking on new apprentices.
The company has said it will work to support everyone in training.
Learndirect, which offers apprenticeships and adult training at sites across England, is responsible for almost 73,000 trainees and employs more than 1,600 staff.
Although the company has not been allowed to recruit new learners since May, people can be recruited on to training commissioned by employers and funded through the new apprenticeship levy through its sister company, Learndirect Apprenticeships.
It is understood that Ofsted inspectors gave Learndirect the lowest possible grade – a four.
In its application to the High Court, Learndirect said publication of the critical Ofsted report could lead to the “catastrophic” withdrawal of government funding, according to the education publisher FE Week, which successfully lobbied for reporting restrictions to be lifted.
Now the government has announced the contract with Learndirect will be wound down gradually, ending in July next year.
Typically in these sorts of cases, a three-month termination notice is served on providers, but this gives Learndirect an additional eight and a half months.
A spokesman for the DfE said: “Where providers are failing to meet the required standards it is right that action is taken.
“We are working with Learndirect and employers to put safeguards in place and ensure no apprentices lose out as a result of the contract ending.”
David Hughes, chief executive of the Association of Colleges, said: “The treatment of Learndirect looks highly unusual, presumably because of the sheer number and geographical spread of the learners and the challenge that represents in terms of transferring them to other providers.
“The key question has to be whether this is in the best interest of students and apprentices who are, according to Ofsted, not getting the quality of teaching and support that they deserve.”
FE Week editor Nick Linford added: “It was clear from the court case that Learndirect had been told by the government funding agency that they would not receive special treatment.
“So in recent days I think political pressure has been put on the government’s funding agency to give Learndirect special treatment.”
According to reports passed to the BBC by FE Week, which was in court, the Ofsted report says the “management of apprenticeships is ineffective”.
It says about one in three of the apprentices did not receive their entitlement to off-the-job learning, failing to develop the skills required to progress to the next step in their career.
The court also heard concerns about the proportion of apprentices who did not complete their apprenticeship on time, which has been increasing “steadily over the past three years”.
The Institute for Public Policy Research (IPPR) think thank calculated that the company had received £631m of public money since it was privatised in 2011.
Senior research fellow Joe Dromey said: “This should be investigated by the Public Accounts Committee, and if Learndirect goes down, government should seek urgently to reclaim as much public funding as possible.”
The watchdog Ofsted said it was pleased at the High Court’s decision to overturn the injunction and would publish its report on Thursday.