An overhaul of the Rural Transport Programme (RTP) will reduce the number of companies running the scheme.
The RTP provides public transport in areas not already served by other operators.
The reforms will involve local authorities in running the services and they are aimed at reducing administration costs.
Over 1.3 million journeys were made last year on routes serviced by the RTP. The total cost of operating the scheme in 2012 was €16.3 million.
The Government has said the programme is poorly organised and has excessive costs.
Instead of 35 companies around the country, 18 Transport Co-Ordination Units will be formed, mostly operating along local authority boundaries.
These units will run the scheme and will eventually have a role in the awarding of hackney licences in rural areas.
Minister of State Alan Kelly said rural dwellers can expect to benefit from more integrated public transport from the beginning of next year.
Speaking on RTÉ's Morning Ireland, the minister said plans to set up the new units will transform the rural transport regime.
Minister Kelly said there are many parts of the country that have no public transport and the new plan would aim to tackle the issue.
The Department of Transport said operators will be challenged to maintain the current level of services given the continuing reduction in subsidies in the coming years.
Only the 35 organisations already involved will be eligible to apply to run the new units. It is anticipated the new programme will be in operation by February of next year.