Long-standing companies say they have been left “devastated” after being stripped of funding just weeks into the £2 million initiative, which was launched by First Minister Nicola Sturgeon.
There is also mounting anger that companies working with disabled performers have been targeted.
Other theatre companies affected by 100 per cent cuts in a shake-up of Creative Scotland’s “regular funding” programme say they are now facing closure.
The quango was awarded an extra £16 million a year in the recent government budget settlement - although £10 million of this is ringfenced for the screen sector and the remainder is to shore up a shortfall in lottery funding.
The quango has not increased its £99 million regular funding pot has not increased, but has opened it up to 19 new applicants.
Children’s theatre companies Catherine Wheels and Visible Fictions, and Birds of Paradise and Lung Ha, who both work with people with learning disabilities, are among 20 organisations and companies to be completely stripped of their long-term funding.
Creative Scotland has insisted that all companies who have lost regular funding deals will still be able to apply for other funding pots.
A spokeswoman for Catherine Wheels said: “As Scotland’s most celebrated and prolific producer of children’s theatre we are devastated by Creative Scotland’s decision to cut our funding.
“Our company has been at the heart of establishing high-quality children’s theatre in Scotland, to a standard which has earned us, and Scotland, the reputation as world leaders in the field.
“We are being penalised for our success. We are nationally and internationally renowned for critically-acclaimed artist-led work, work which creatively engages and inspires young people.
“Ironically, in the Year of Young People, Creative Scotland’s cuts mean there are now no regularly funded children’s theatre companies in Scotland.
“Scotland is the now the only country in Europe without a regularly funded children’s theatre company and this is an embarrassment for a progressive nation.”
A spokeswoman for Visible Fictions said: “Whilst we appreciate that funds are limited and recognise the importance of bringing new companies into the regular funding portfolio, we’re saddened to longer be in this network.
“This decision leaves Scotland with no regularly funded children’s theatre organisations as we enter into the Year of Young People.
“Our regular funded status has allowed us to build a robust infrastructure over the years, which in turn has enabled us to deliver high quality work to young audience’s all over Scotland and beyond.”
Robert Softley Gale, artist director of Birds of Paradise, said the funding cuts had “devastated” the company in its 25th anniversary year.
“Central to the impact that we have, and the benefits that we bring to the arts in Scotland, is the role that we play in putting the stories of disabled people on stage, both for artists and audiences.
“By Creative Scotland cutting us in this way, it feels that these disabled stories aren’t meant to be part of the arts ecology in Scotland.
“This comes at a time when the arts community should be engaging with social and political issues, and so this is a strong message to us. It feels that disabled artists do not fit into the artistic mould or community, and this is the most devastating message of all.”
A spokeswoman for Imaginate, organisers of the Edinburgh International Children’s Festival, said: “It is a huge blow for the sector that both Catherine Wheels Theatre Company and Visible Fiction have had their funding entirely cut.
“These companies have helped build Scotland’s reputation for excellence in the young audience sector and they are now being put in a position where they will struggle to create work. It is bad news for them and consequently bad news for us.
“In the Year of Young People, Scotland is now the only country in Europe without any fully funded theatre company for children”.
A statement from the Scottish Society of Playwrights said: “While we recognise the need to make difficult decisions in a tight funding climate we feel we have to express our dismay at the withdrawal of regular funding from some significant and well-established theatre companies.
“Lung Ha and Birds of Paradise are specialist companies who have championed inclusivity and diversity in Scottish theatre in a way not seen elsewhere.
“Catherine Wheels and Visible Fictions are internationally celebrated pioneers of theatre for young people in Scotland.
“This loss of funding leaves Scotland without a regularly-funded company in that sector. In the Year of Young People, this is hugely disappointing.”
Creative Scotland has announced that a new £2 million touring fund for theatre will be set up from 2019, with transitional support offered for affected companies in the meantime.
A spokeswoman for Creative Scotland said: “As is usual practice, we will not be making any public announcements regarding unsuccessful applicants and their individual assessments will only be discussed, in confidence, with the applicant directly.
“This regular funding round has been a highly competitive application led process where demand has far outstripped available funding.”
Culture secretary Fiona Hyslop said: “Funding decisions taken by Creative Scotland are independent of the Scottish Government.
“We have increased funding for Creative Scotland by £6.6 million in the draft budget, allowing them to maintain the same level of funding for regular funded organisations, and to make objective decisions purely based on the merits of the applications.”