The Games' overall £9.3bn budget remains unchanged and the government claimed the contingency remains sufficient to cover the remaining risks to the project.
A total of £394M will be drawn from the Olympic Funders Group contingency, the part of the budget designed to guard against risks outside the control of the Olympic Delivery Authority (ODA).
Separately, £67M has been released from the ODA's programme contingency.
The use of part of the contingency funds contained in the budget - an additional £326M towards the Olympic Village and £135M towards the International Broadcast and Main Press Centres (IBC/MPC) - is needed to meet a shortfall in private sector funding as a result of the global economic downturn.
Olympics Minister Tessa Jowell said: "The Village and media centres are absolutely essential to a successful London Games with a real lasting legacy. With private sector funding now much more difficult to secure because of the global economic downturn, it is right that we take steps to safeguard these projects.
"The extra funds we have allocated today come from existing contingency funds within the overall £9.3bn budget. Lower than anticipated construction inflation and good progress across the project has reduced risks, meaning that the overall budget is unchanged and enough contingency funds remain. We are determined to deliver the games within budget.
"The increased public investment in these projects also means that the public purse will receive a greater share of receipts when they are sold after the Games."
The £326M extra funding for the Olympic Village includes the £95M million announced last year and will allow works to continue whilst the ODA continues to negotiate with private developer Lend Lease, and the banks, regarding private investment for the Olympic Village.
Negotiations are also continuing with Registered Social Landlords (RSLs) in relation to the provision of affordable housing which also contributes to the funding of the overall project.
The Village will house up to 17,000 athletes during the Olympics and over 6,000 during the Paralympics. After the games about one third of the apartments will be available as affordable housing.
The IBC/MPC - which will house approximately 20,000 journalists and technical staff from around the world - will now be funded entirely from the Olympic budget. Following cost reductions of £25M, the total public funding for the project will be £355M. In addition to the original £220M public sector funding, £135M contingency will be required comprising £68M from the Funders Group contingency and £67M from the Olympic Delivery Authority's programme contingency. The public sector will retain ownership of the asset and receipt of all revenues from its sale after 2012.
The new budget includes funding to ensure that the buildings left in legacy have the flexibility to be adapted to a wide range of uses, to maximise the potential employment opportunities after the Games.
The IBC/MPC are still planned to be built as permanent structures with some temporary elements for the Games. They will be based at Hackney in the north-west corner of the Olympic Park as originally planned.
The £9.3bn public sector funding package announced in March 2007 included £2.7bn of contingency. £0.5bn was released to ODA when its Baseline Budget was confirmed at the end of 2007, and £0.238bn was allocated as contingency for security. As a result £2bn of contingency remained available for the ODA of which 25 per cent has been released leaving £1.5bn remaining.
2. Of the total contingency released only £35M has not been allocated to the Village or IBC/MPC. Of this, £21.5M was allocated to cover budget increases required on a number of projects, including the headhouses for the powerlines and legacy requirements for the Aquatics Centre; £8.9M was allocated to the Olympic Stadium for primary strengthening works; £4.7M was allocated to the Handball Arena for HD lighting, improved acoustics and additional seating.