The International Olympic Committee (IOC) executive board approved moving the track cycling and mountain bike events to an existing venue in Izu.
Both were due to be in temporary venues - track cycling in the Ariake district and mountain biking at Sea Forest.
The changes to the programme will bring savings of £66m to the Games budget.
Earlier this year, the Japanese government scrapped plans for a £1.3bn Olympic stadium designed by British-Iraqi architect Zaha Hadid - the designer of the London 2012 aquatics centre.
A new plan costing about 60% of the original is expected to be agreed.
Sea Forest will still host the canoe sprint and rowing events, plus the cross-country and eventing elements of the equestrian programme.
An IOC statement said: "The athlete experience will be guaranteed, as all athletes and team officials whose events will be at Izu will have the option to stay in the main athletes' village before and after their competition.
"During the competitions, they will stay at a satellite village located close to the event venues."
International Cycling Union president Brian Cookson said his organisation had embraced the IOC's cost-cutting programme and the UCI would work with local authorities to build on the sport's legacy in Japan.
All sports have now been assigned venues for Tokyo 2020 except football, with a decision on that expected after next year's Rio Olympics.
Cycling events at the Tokyo 2020 Olympics will be held 75 miles away from the city as part of a £1.2bn programme of cuts.