Education Secretary Michael Gove has frozen grants to 122 councils for the building and running of up to 1,300 schemes.
The decision will come as a blow to small contractors lined-up to build the new playgrounds.
Only schemes where construction has already started will be allowed to continue.
The £235m Playbuilder scheme was launched by Labour more than two years ago to develop 3,500 playgrounds designed by and for the communities they were to serve.
Each local council was given cash to build 22 play areas. Some of these have now been built.
This year, grants for over 1,300 playgrounds in 93 local authorities had been approved.
The Department for Education could not say exactly how many playgrounds would be scrapped as it is only now collecting information about which schemes are in construction.
It has warned local councils not to incur any more costs on schemes and said it will review closely any commitments already made.