Minister of State Alan Kelly has said that the principle of paying 55 fee-paying schools almost €100m annually must come to an end.
Mr Kelly told RTÉ's The Week in Politics that consideration will have to be given to the private schools of religious minorities, but the overall sum paid to fee-paying institutions will be looked at in the Budget.
The Department of Education has carried out an audit of private schools and the publication of this is imminent, Mr Kelly said.
Fianna Fáil's Seán Ó Fearghail said his party would have to see the results of the audit before identifying what cuts, if any, could be made to the subsidy given to private schools.
However, several Labour TDs have called on Education Minister Ruairi Quinn to scrap the subsidy entirely in the next budget.
Dublin South West Labour TD Eamonn Maloney described the system as "education apartheid".
Other Labour TDs, including Aodhán Ó Ríordáin and Michael Conaghan, have also called for the funding to be reviewed.
However, school principals have warned that a dramatic cut to funding would shut their schools down.
Castleknock College principal Oliver Murphy said the State would then have to pick up the bill and this would end up costing more.
The Department of Education must find savings of €77m in the Budget.
