The government's £10.4bn skills agency, the Learning and Skills Council, is to be closed down - with most of the funds to be transferred to local authorities.
Training and education courses will be commissioned by local authorities
The plans have been announced by the government in a White Paper setting out the funding mechanism for the raising of the school leaving age to 18.
Local authorities will now be responsible for commissioning courses and training for older teenagers.
They will also be held accountable for ensuring that youngsters stay on to 18.
The White Paper, Raising Expectations: Enabling the System to Deliver, proposes the widening of local authorities' responsibilities - in the run up to the raising of the age for leaving education and training in England.
Local authorities will receive £7bn in annual funding for 16 to 19 year olds - and there will be a new Skills Funding Agency created as a funding body for further education colleges.
It will mean that local authorities will be fully responsible for offering teenagers a range of options, up to the age of 18 - including A-levels, GCSEs, the new Diplomas and apprenticeships.
Schools Minister Jim Knight said that this would put responsibility "fairly and squarely" on the shoulders of local authorities, with benefits to be gained from such local accountability.
Further Education Minister Bill Rammell said that the switch in funding would "reinvigorate local democracy".
This will mean the closure of the Learning and Skills Council in the next two years. This agency, created in 2001, is the public body currently charged with providing and improving the skills needed by a modern economy.
Mark Haysom, the skills council's chief executive, praised the achievement of the funding agency as a "remarkable success story" - but said that the "world does not stand still".
Mr Haysom said he expected transfers of some staff from the Learning and Skills Council to local authorities and other funding agencies.
In 2006, staff at the Learning and Skills Council went on strike in protest at an earlier round of job losses.
The government has already outlined a transfer of funding to local education authorities, in its Machinery of Government announcement last summer - but it is now providing details of how this will be put into practice.
Local authorities, perhaps operating in clusters, will be expected to provide the "strategic commissioning" necessary to ensure that every young person has access to a place in learning up to the increased leaving age of 18.
In this commissioning capacity, the White Paper says that local authorities will be able to "expand strong and cease to fund weak provision" - and it promises "robust intervention where there is serious underperformance".
From 2013, it will also mean that local authorities will be responsible for ensuring that young people have access to apprenticeship places.
There will also be a Skills Funding Agency created to "ensure public money us routed swiftly, efficiently and securely to further education colleges and providers".