The human rights and advocacy group CAGE in London said it accepted the loss of funding from the Roddick Foundation and the Joseph Rowntree Charitable Trust.
But CAGE blamed a "neo-conservative" leadership on the U.K.'s Charity Commission for pressuring the two charities to halt funding.
"We respect their decision. We thank them for their past support. Both of these charities have played a significant role in contributing to the development of Muslim civil society here in the UK," CAGE spokesperson Amandla Thomas-Johnson said Friday.
The termination of funding came after the Charity Commission "took robust action" and cited how "public statements by CAGE officials heightened concerns about the use of charitable funds to support their activities," the commission said in a statement.
The commission didn't specify those statements by CAGE, but stated that "in our view, those statements increased the threat to public trust and confidence in charity and raised clear questions for a charity considering funding CAGE's activities as to how the trustees of those charities could comply with their legal duties as charity trustees," the commission said.
"CAGE is not a charity but has been in part funded by British charities. As it is not a charity and given the nature of its work, and the controversy it has attracted, the Charity Commission has been concerned that such funding risked damaging public trust and confidence in charity," the commission said.
"As the regulator of charities, we expect all charities and trustees to ensure that all charitable funds are used according to their charity's purposes and in the way that the public would expect," the commission said.
CAGE's work with 'Jihadi John' as a young man
CAGE said it had worked with Emwazi and indicated that British authorities' tactics
pushed him to radicalize.
CAGE said that emails he sent the organization paint
a picture of a desperate man hounded by authorities who saw his plans for a new life crumble as he tried unsuccessfully to get help.
Emwazi felt he was being harassed by authorities and tried to seek legal help to stop it, according to CAGE.
Emwazi, a Kuwaiti-born Londoner, was a "polite" and "beautiful young man" who would drop into the CAGE office with treats to thank the group for helping him, the group said.
Emwazi came to CAGE in 2009 looking for support when he felt that British authorities were -- in the words of Asim Qureshi, CAGE's research director -- "harassing" him.
But Emwazi has now been identified by U.S. officials as the masked man in ISIS videos showing beheadings of Western hostages.
More than a dozen British administrative court documents obtained by CNN
reveal British security services initially believed Emwazi was part of a radical West London recruitment network for terrorist groups in East Africa.
The funding numbers
The two charities gave sizeable funds to CAGE.
The Rowntree Charitable Trust has given 271,250 British pounds, or almost $408,000, to CAGE since 2007, the commission said. The trust had pledged a total of 305,000 pounds, or almost $459,000, the commission said.
The Roddick Foundation gave CAGE of 120,000 pounds, or more than $180,000 between 2009 and 2012, the commission said.
In acknowledging the funding losses, CAGE criticized the commission.
"This is just another manifestation of their objective of pursuing a Cold War on British Islam," Thomas-Johnson said. "CAGE will remain committed to its principle of speaking truth to power and calling for accountability and transparency. We will not hesitate in performing our role as whistleblowers and as advocates for due process."
Supporters of CAGE tweeted their criticism of the Charity Commission and the two philanthropies' decision to terminate funding.
One supporter remarked that "if @UK_CAGE is not there to provide us with a counter-narrative when it comes to 'radicalization'.... who will?!"
The commission said it will soon conclude its "open cases" into the two charities and publish a report and lessons " for other charities which fund non-charitable bodies."