Several protests against the cuts have been held in Newport
More than 1,000 vulnerable people on the Isle of Wight are set to lose public services they rely on.
The rules for how councils use the government's Supporting People (SP) funding were relaxed last year.
Isle of Wight Council has decided to use half of the £5.5m on other things next year. It is the only council in England to do so.
It said it would spend an extra £2m on adult social care and vulnerable adults will be helped in other ways.
Currently 2,000 disabled and disadvantaged adults are supported by charities and support groups through the SP scheme.
Isle of Wight Council needs to cut £11m from its 2010/11 budget and it has decided to divert £2.7m of the SP money to meet other costs.
A survey commissioned by the government found that the council was the only one in England to use the SP funding in this way.
The decision means many current SP contracts will not be renewed when they come to an end on the 30 June.
The council said it would continue to serve 900 people, but that leaves about 1,100 losing out.
Several protests were held outside County Hall in Newport by those opposing the cuts before the council made their decision last Wednesday.
Bob Dalton, managing director of New Horizons, one of the organisations to which people are referred from services such as the NHS and social care, said they dealt with a "vast amount of people".
He said: "We help the homeless, teenage parents, the elderly, people with learning difficulties, drug addicts, alcoholics, people with mental health problems.
"We will all be feeling the cuts in our services but to cut our service completely by 100% is just ridiculous.
"You're taking away the support and they've not even suggested any ways of helping these people in the future."
Melissa Smith, who is deaf and blind, has been receiving help for the past six years.
"If the funding stops then it basically means my outside world is cut off," she said.
"Support workers are my link to the outside world, they tell me what's going on in the community, things that are happening that I can't get through radio or newspapers or television.
"My parents help me, and they do a brilliant job, but having to rely on your mum and dad at the age of 34 is stupid. I want my independence."
'Potential for duplication'
However David Pugh, leader of the council, said they have only acted because the government removed the "ring-fence" of funding for the programme.
"By doing that they have sent a clear signal to ourselves, and many other local authorities around the country, that the money which was previously allocated for projects in this area can actually be spent at a local authority's discretion and more broadly than before," he said.
"We are now able to look at using that funding and supporting social care for older residents as well.
"In both adult social care and Supporting People there is the potential for duplication across the care side of services and also the support side of services."