The money will be directed through a new Durham Cultural Partnership, which will operate via an Arts and Festivals Hub based at the Gala Theatre.
Making a crisis out of a drama as arts funding is cut
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After a wave of Government cuts, the arts funding body now has to operate with an overall cut to its budget of 29.6 per cent.
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The Customs House, in South Shields, announced its disappointment that although it will benefit from Arts Council support in the next three years to the tune of 100,000 it is at a substantially lower level.
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Coun Eunice Huntington, Durham County Council Cabinet member for healthier communities, said: "We are thrilled that our application for funding from the Arts Council has been successful.
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Alison Clark Jenkins, Arts Council regional director, said: "This has been a difficult process, we've made some tough choices and there will be significant changes from April 2012.
Yesterday, the Echo revealed that the National Glass Centre and the Northern Gallery for Contemporary Art in Sunderland will receive 1.1million over three years.
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Durham County Council's share of the funding will help fund the annual Brass and book festivals and signature events such as the biannual Lumiere as well as other activities aimed at increasing involvement in the arts.
Are you an arts group that's lost its Arts Council funding? Contact the newsdesk on 501 7326.
"This, combined with other sources of Lottery funding, including grants for the arts, will ensure continued innovation and creativity."
It means that 43 of the region's groups and 206 nationally that applied for funding have been turned down.
Durham County Council was one of the winners with a cash injection of 635,000 to boost its arts and culture in the future.
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"The grant will help us to continue providing some of the major arts events that have proved so popular over recent years as well as giving us the opportunity to develop new events and activities."
Of the 85 North East arts organisations that applied for funding from the Arts Council's 2012 15 programme, 42 will receive funding of 48million for three years.
Under the old system, 69 organisations in the North East were regularly funded.
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