Under the new formula, core funding for national organizations will be cut by 10 per cent, while regional organizations face either a 10 per cent cut to their core funding or a ceiling of $500,000.
But Dene National Chief Bill Erasmus says legally Canada cannot make the cuts.
"Canada doesn't have the authority to do what they are attempting to do" he said. "They are proposing to make unilaterally-made decisions. That money is legally there in a treasury board for our purposes and they can't just say 'Hey, in two years, we will cut you.' We won't let that happen."
Other Northern aboriginal organizations including Inuit Tapiriit Kanatami and the Council of Yukon First Nations are also affected.
Erasmus said he is speaking with other chiefs across the country about how to address this latest round of cuts.