Free access to national museums and galleries in England will stay until at least 2011, the Department for Culture, Media and Sport (DCMS) has said.
Museums can "continue with work they've been doing", the DCMS said
Chancellor Alistair Darling pledged a rise in arts funding in line with inflation in his pre-Budget report.
"We had been asked to prepare for a 5% cut," a DCMS spokesman said.
But the Lib Dems argued less cash would be available to organisations overall this year after lottery funding was diverted to fund the 2012 Olympics.
While it was a "relief" that funding had not been cut, "the modest increases do little to repair the damage caused by the lottery smash-and-grab raid to fill the Olympic budget's black hole", said the party's culture spokesman, Don Foster.
He also criticised Mr Darling for "ignoring" tourism in his statement.
The Conservatives said they would not be commenting on individual elements of Mr Darling's pre-Budget report.
But Sir Christopher Frayling, who chairs Arts Council England, said it was "a very good result" which would "allow us to build on the current excellent health of the arts in England".
"We have campaigned long and hard for this settlement, and in the context of a tough spending round, it is good to know that the government has listened to the case we put for the arts," he added.
Delivering his speech in the Commons, Mr Darling also promised the settlement would "deliver the Cultural Olympiad" in the run-up to London's Olympics in 2012.
And he said it would offer support for sporting activities, "so that every child and young person can take part in five hours of sport a week".
He promised to increase the department's funding from £1.68 billion in the current financial year to £2.21 billion in 2010-11.
Last month 13 leading artists and fashion designers wrote to Prime Minister Gordon Brown, calling for the government to avoid cutting arts funding in England.
"Britain's museums, visual arts, music, theatre and films are a constant inspiration to creators such as ourselves," wrote high-profile figures including Tracey Emin and Dame Vivienne Westwood.
"Yet the government's steady investment in the arts, which has borne such fruit over the past 10 years, now appears to be under threat."
Celebrities including Tracey Emin said arts funding was "under threat"
Arts Council England also warned it would need to find an extra £12 million to ensure some institutions no longer faced the prospect of closure.
"Arts, culture and sport are at the heart of the government's mission to develop talent and provide opportunity for all," Culture Secretary James Purnell said in a statement after Mr Darling's announcement.
"Over the next three years, thanks to a generous funding settlement, we will ensure that these sectors continue to thrive and flourish, maintaining the UK's reputation for cultural and sporting excellence."
Separately, Mr Darling promised to increase the UK Foreign Office budget, "including spending £460 million in 2010 on the British Council, the BBC World Service, and the launch of BBC Farsi and Arabic TV channels".
The budgets for the World Service radio station and the forthcoming Farsi and Arabic TV channels come from so-called "grant-in-aid" from the Foreign Office, rather than the licence fee, which funds the BBC's UK output.