The scrapping of the fund means that responsiblity for ongoing investments has been deferred to the channel's corporate development team and Stuart Cosgrove, director of creative diversity.
The move follows the departure of Daniel Heaf who left his position as digital commissioner of 4iP in June to return to his former employer and take up the role of BBC Worldwide digital director.
Prior to his two years at Channel 4, Heaf was director of digital ventures at BBC Worldwide.
Up to 60% of the 4iP investment, which was initially backed by former Channel 4 chief executive Andy Duncan, is understood to have already been allocated to more than 50 projects backed by the fund, over a two-year period. Projects include the iPhone app, AudioBoo, which linked audio files to social media sites such as Facebook and Twitter.
Channel 4's digital departments will now report to Richard Davidson-Houston, who was appointed head of online in July.
Davidson-Houston will report to incoming chief creative officer Jay Hunt, who is due to take up her post in January 2011. The existing teams will be consolidated into a single department, Channel 4 Online, which will handle all the network's multi-platform propositions and services.
The television network pledged to invest a total budget of £50m in partnership with the Arts Council, the National Endowment for Science, Technology and the Arts (Nesta) and a series of other funding organisations.
Under Davidson-Houston's leadership Channel 4 Online will be fully integrated into the content and commissioning division to ensure the channel's output is editorially aligned across all platforms.
The Channel 4 Online department will have, according to the network: "[a] clear editorial focus ensuring all multiplatform work meets at least one of three objectives: increase overall consumption of television programming; generate incremental revenue; or increase public value for Channel 4."
Davidson-Houston said: "Channel 4 is acknowledged as the creator of some of the most talked about online work of the last few years. Key factors in this success have been the skills and creativity of the individual teams and I am very excited to bring them together around common goals.
"A single online department at the heart of the channel's content and commissioning division will be easier for external companies to work with, helping attract the best, most innovative ideas which in turn will enable us to create competitive and relevant experiences for our audiences.
"This streamlined structure will also ensure all our output is editorially aligned across platforms, helping Channel 4 maintain its distinctive voice in a converged world."
Cosgrove said: "Digital innovation is critical to our vision of Channel 4 as a converged creative business and working with the most talented new digital companies is paramount.
"As an organisation we are now much clearer about how to use digital media to deliver our unique creative remit with even greater impact. 4iP's integration across Channel 4 means that digital innovation and regional talent development will be placed at the heart of the business."