The monthly payments of $335,000 dollars made through the Defence Intelligence Agency began in 2002.
They will end on 30 June, when the scheduled "transfer of power" from US-led occupying forces to an Iraqi government takes place, an official with Chalabi's group told the New York Times on Tuesday.
Totalling at least $27 million, the classified programme helped the INC gather intelligence in Iraq, but internal reviews by the US government have found that much of the information provided before the US-led invasion last year was useless, misleading or fabricated.
The INC defended its intelligence-gathering, telling the Times its role in providing weapons intelligence was overblown and that it had helped capture 1500 fighters, mostly people loyal to former Iraqi dictator Saddam Hussein.
The programme had been scheduled to end on 30 September last year, but was extended twice to 31 December and again to 30 June 2004.
US officials were divided over the
usefulness of the INC
The INC official quoted by the Times said he did not know why the US government decided not to extend the programme another time.
But US officials have for weeks said the US government was debating cutting off the INC, saying they had questions about the intelligence it provided as well as about whether Chalabi was motivated more by a desire for power.
INC spokesman Intifadh Qanbar declined to comment on the funding or on intelligence the group might have provided, but he said: "I cannot talk about this confidential issue ... but INC personnel are risking their lives every day in Iraq to save American lives."
Chalabi was head of one of the foremost Iraqi opposition movements during Saddam Hussein's rule and managed to maintain close ties with the US authorities despite being wanted for multi-million dollar fraud in Jordan.
He was sentenced to 22 years hard labour by a Jordanian court in 1992 after being tried in his absence over the disappearance of $60 million from the Petra Bank, which he set up in 1977 and which crashed in 1989.
He became one of his country's best-known political figures in exile and even tipped as a possible successor to Saddam Hussein. However, he has consistently denied that he is a candidate for office in the new Iraq.