Airports in the South West will no longer get grants to expand from the South West Regional Development Agency.
Instead the organisation wants to encourage airports to become "greener" and lessen their environmental impact.
Campaigners who have been fighting to stop expansion at Newquay airport welcomed the news.
The RDA said it would invest in greener planes and better public transport access to airports. It said funding already allocated would still be given.
We will be investing our money in greening airport operations 
Dan Oakey, SWRDA
Dan Oakey from the South West Regional Development Agency said: "We won't be investing in further airport expansion across the region. We will be investing our money in greening airport operations."
He also said that airports are very important to the South West, contributing £420m to the economy and over 8,600 jobs.
Andrew Mitchell from Cornwall County Council, which owns Newquay Airport, said the policy change would "absolutely not" affect plans to expand the airport in order to double the number of passengers it serves and make it profitable.
Airports 'needed'
The council hopes to buy land left vacant when neighbouring RAF St Mawgan closes in October.
"The £8m (already promised by the SWRDA) is still in place. They are fully behind the county council, knowing to have a strong economy in the region we need the airport," he said.
Oliver Baines from Stop Newquay Airport Expansion said: "We have always been told that the economic benefits of airport expansion outweigh the considerable environmental impacts of noise, traffic and climate changing emissions ... this (news) makes it clear that not even the local development agency now believes this." Other airports in the South West which may be affected by the SWRDA decision are Plymouth, Exeter, Bristol and Bournemouth.