More than 15,000 Australians living with disability will be directed to better performing job providers following a major review.
About six per cent of the Disability Employment Services program will be discontinued, affecting 52 of 104 providers nationwide due to underachievement.
Eight will be closed altogether.
Social Services Minister Amanda Rishworth says 15,550 disabled Australians will be transitioned to more suitable close-to-home services, giving them the best opportunity to obtain sustainable and meaningful work.
The consolidation comes ahead of Monday's Disability Employment Roundtable in Canberra and the government's September Jobs and Skills Summit.
Ms Rishworth says assessing the performance of DES providers means only the most effective will continue to receive commonwealth funding.
"Poorly performing DES providers were given every opportunity to put measures in place to improve and were aware of the formal review process," she said on Sunday.
"It is vital that funding is directed to organisations who have proven they are delivering the best support to participants."
The review was initiated following evidence to the Royal Commission into Violence, Abuse, Neglect and Exploitation of People with Disability.
The inquiry was told some providers were not achieving outcomes, with some job placements ending abruptly or only lasting the duration of government subsidies.
Chair of Catholic Social Services Australia Francis Sullivan says the shakeup of the sector was long overdue.
"Evidence at the royal commission showed that for some time poorly performing DES providers seemed to be more interested in collecting government payments rather than finding good long-term jobs for their clients," he said.
"While there are many good providers hopefully with these reforms, we see a sector that now fully has the interests of people living with a disability at the very centre of their operations."
To support participants through transitions to new providers, their mutual obligations will be suspended for the next two months starting on Monday.
Almost 2.1 million people living with disability are of working age in Australia.
However 93 per cent of unemployed people aged 15-64 with disability experience difficulties in finding work.
The unemployment rate for people living with disability is more than double that of working age Australians.
Disability employment and reducing barriers to employment is set to be a key stream in the government's September summit, which will bring together more than 100 people from various industries.
