The Chancellor will set out the plan as part of the Spending Review, which economists say will herald the most radical cuts ever seen in Britain.
Government sources said the Chancellor has decided that the time has come to "grasp the nettle" on fairer school funding.
The Chancellor is committed to protecting funding for schools, but is expected to announce that he and the Education Secretary, Nicky Morgan, have agreed it should in future be distributed differently.
Earlier this year, 111 MPs wrote to David Cameron asking for reform, and the National Association of Head Teachers and Association of School and College Leaders have also urged ministers to act.
The current way that funding is allocated for schools has been widely regarded as unfair for years. Allocations to local authorities are based on decisions made at local level over 10 years ago.
This means that while the proportion of pupils eligible for free school meals in places like Dorset and Lincolnshire has doubled in the last 10 years, their core funding has taken no account of the change.
Under the current system, the ten best funded areas of England will receive an average grant of £6,297 per pupil this year, compared to an average of just £4,208 per pupil in the ten most poorly funded areas.