Liverpool and Sheffield councils have won a joint high court action that ruled cuts in European funding were unlawful.
Lawyers brought action arguing the reduction of 65% funding was disproportionate to other areas.
The judge in the case - heard in Leeds last week - quashed the funding decision and ordered the government to reconsider.
Liverpool Mayor Joe Anderson said it was "excellent news".
The Liverpool City Region is made up of Liverpool, Knowsley, Sefton, Halton, Wirral and St Helens councils.
Evidence presented to the court showed that, based on government figures, ministers allocated 150m Euros (£124.7m) less to Liverpool City Region and almost 90m Euros (£74.77m) less to South Yorkshire than they had estimated their share to be.
The government allocated Merseyside only 202m Euros (£167.835m) of EU funding for 2014-20, when the European Commission calculated it to be around 350m Euros (£290.147m).
The balance was instead allocated to other areas by the government.
Councillor Anderson said the government had "complete disregard" for its legal duty when making the decision and it was "well-documented that Liverpool is one of the most deprived areas in the country".
He said he had described it previously as "Robin Hood in reverse - taking from the poor to give to the rich".
Judicial review proceedings were issued on 26 September and a formal case was submitted to the High Court on 15 October. The case was considered by a High Court judge sitting in Leeds last week and the ruling was published earlier.
Over the next seven years, the funding award to Liverpool City Region works out at 147 Euros per head of population (£122.14), compared to 380 Euros per person (£315.65) in the previous funding round from 2007-13.
Although the money comes from the European Union, the decision on allocations within the UK is decided by the British government.
Business minister, Michael Fallon, said: "I am pleased the High Court accepted all our main arguments - we have always said the structural funds allocations were sound.
"We are looking into whether our Equality Impact Assessment requires further work, and we hope to submit the final allocations to the European Commission in the next few weeks.
"Structural Funds boost jobs, growth and skills, and the sooner we can get this money to all parts of the UK the better."