The Federal Government will partially reverse funding cuts to the Australia Council, following an outcry from the arts sector.

The 2015 federal budget saw the Australia Council suffer a $105 million cut over four years to bankroll a new initiative called the National Program for Excellence in the Arts (NPEA).

The move drew criticism from artists, performers and writers because the NPEA would have been administered by former arts minister George Brandis, with claims it would not be independently managed.

New Arts Minister Mitch Fifield has returned some of the funding to the Australia Council and renamed the NPEA to Catalyst - Australian Arts and Culture Fund.

About a third of the budget cuts — or $32 million — will be given back to the Australia Council over the next four years, which operates at arms length from the Federal Government.

The Australia Council's total funding over the next four years will be $783 million.

Catalyst will still be administered by Senator Fifield and will have $12 million that it will allocated annually, down from $20 million, with applications looked over by independent assessors.

Individual projects will not receive more than $500,000 in one year and will not cover film or TV productions.

Senator Fifield stressed that Catalyst will have a focus on smaller arts projects, following concerns from the federal opposition and the arts industry that the NPEA was just a "slush fund".

"The rebalancing of funds will provide the Australia Council with greater capacity to meet the needs of small and medium organisations and is also in recognition of its role as the Commonwealth's vehicle for supporting individual artists," the minister said in a statement.

"The new Catalyst fund is open to small, medium and large arts organisations at a national, regional and community level.

"It will support projects that demonstrate innovation, increase access and participation in the regions and enhance our international reputation."

Senator Fifield, who stepped into the role following a reshuffle by Prime Minister Malcolm Turnbull, conceded in October the NPEA had caused some "unhappiness" in the arts sector.

The decision to establish the NPEA, as well as budget cuts in 2015 and 2014, triggered demonstrations from artists, who used their skills to post artwork incorporating Senator Brandis' face to protest against the changes.