It will sell investments worth £12m in firms where more than 10% of revenue comes from extracting thermal coal or the production of oil from tar sands.
The Church said it had a "moral responsibility" to act on environmental issues to protect the poor, who were the most vulnerable to climate change.
The Church manages three investment funds worth about £8bn.
"Climate change is already a reality," said Rev Canon Professor Richard Burridge, deputy chair of the Church's Ethical Investment Advisory Group (EIAG).
"The Church has a moral responsibility to speak and act on both environmental stewardship and justice for the world's poor who are most vulnerable to climate change," he said.
"This responsibility encompasses not only the Church's own work to reduce our own carbon footprint, but also how the Church's money is invested and how we engage with companies on this vital issue."
Analysis: Helen Briggs, environment correspondent
With the global campaign to move money out of fossil fuels gaining momentum, the Church of England's commitment to divest for the first time from the most polluting forms of energy is being seen as a significant step.
The church joins several UK institutions that have already signed up to the movement, including Glasgow University and the British Medical Association. But for some, the announcement does not go far enough.
The Church of England says it will withdraw investments worth £12m from companies that make money from extracting thermal coal - used in generating electricity - or producing oil from tar sands.
This is but a fraction of its total investment portfolio and some are already calling for the church to go further by divesting from all fossil fuels. But the church takes the view that engaging with fossil fuel companies is productive for other forms of energy, such as oil and gas, which may be needed as the world moves towards a low-carbon economy.
The new policy "marks the start of a process of divestment as well as engagement with fossil fuel companies and better aligns the Church's investment practice with its belief, theology and practice", added Bishop Nick Holtam, who is the Church of England's lead bishop on environment.
The Church said it also wanted more intensive engagement with companies that made a significant contribution to global greenhouse gas emissions. It recently filed shareholder resolutions at BP and Shell calling for more transparency over climate change.
Christian Aid's director of policy and public affairs, Christine Allen, said the policy ought to prompt energy firms to rethink their businesses: "The openness to further divestment from intransigent companies must be heard as a final warning to the energy industry: shift investment out of fossil fuels and into renewables or your investors will do so for you.
"Every pound divested by churches, public institutions or individuals is a sign that we are serious."
The Church of England does not directly invest in tobacco, pornography or payday lenders.
Two years ago, it emerged that the Church had indirectly invested in Wonga - which the Archbishop of Canterbury, Justin Welby, admitted to being "embarrassed and irritated" about. It has since ended that investment.
The Church of England is adopting a new climate change policy and will cut its investments in fossil fuel companies.