Media reports early last week had suggested that the coalition government was planning to scrap the FSA entirely, but it will now survive in a truncated form with staffing levels cut by 100 to around 2,000.
However, some functions will be transferred to the Department of Health (DoH) and the Department for Environment, Food and Rural Affairs (DEFRA).
According to a DoH statement, the FSA will focus on a core remit of food safety policy and enforcement.
Meanwhile, the DoH will assume responsibility for nutrition policy in England and DEFRA will become responsible for English country of origin labelling, non-safety related food labelling and food composition policy.
With the FSA's future outside England yet to be decided the body will retain responsibility for the transferred areas in Scotland, Wales and Northern Ireland.
A timescale for the agency's revised funding - its consolidated budget was £155m in 2009/10 - was being discussed with the DoH and DEFRA, an FSA spokeswoman told FoodManufacture.co.uk, adding that "we expect this all to be finalised during the next few weeks."
A DoH spokesperson said that on “crucial issues of food safety” the FSA would keep its autonomy, with independent advice from its departmental experts “final” and not subject to question.
Health secretary Andrew Lansley said, “It’s absolutely crucial for the FSA to continue providing independent expert advice to people about food safety. But bringing nutrition policy into the Department [of Health] makes sense.
“It will enable a clear, consistent public health service to be created, as our public health white paper later this year will set out.”
Restructuring of the FSA will see approximately 70 policy posts move to the DoH and 25 transferred to DEFRA, as the government strives to improve efficiency and bring policies ‘in house’.
The FSA has had a difficult relationship with the food industry in recent years, notably over its approach to nutrition: it fought the industry over traffic-light labelling, nutrient profiling, salt and fat reduction and the Southampton University study on food colours and hyperactivity.
However, Food and Drink Federation director general Melanie Leech welcomed the decision to clarify the FSA’s remit and safeguard its independence.
She said: “We believe it’s important to maintain an independent food safety regulator and fully support today’s decision by the government to retain the FSA.
“The FSA has helped create an environment in which public confidence in the food they eat has grown significantly in recent years and it makes sense to build on that by focusing the agency’s future activities on safety and hygiene issues.
“We also support the decision to move responsibility for nutrition and other food policy issues back into government departments. This should lead to clearer and more consistent policy making, while avoiding unnecessary duplication of effort across Whitehall.”
But the British Retail Consortium said it was vital that a good dialogue with the food industry was retained, particularly in the areas of food labelling legislation, when the FSA's responsibilities in this area were split between two government departments.
"Labelling and food composition are complex, technical issues that are crucial to food retailers. Thousands of the products they sell every day will be affected. Food labelling is a key issue for retailers. Currently, we're in the middle of a fundamental European labelling review.
"It's vital the high-level of expertise and collaborative approach, previously available from the FSA, are retained once responsibility for these issues has been transferred."