Basketball was one of several big losers in UK Sport's December budget announcement which showed an overall 11 percent rise in funding for the Rio Games compared to London 2012.
After being invited to make a formal representation against the decision, however, basketball has benefited from a U-turn by UK Sport, the government agency which funds elite sport.
"Basketball and Wheelchair Fencing presented new and compelling performance information that re-prioritised those sports," UK Sport said in a statement on Friday.
UK Sport will now fund 44 sports on a four-year cycle as they hope to better the 2012 London Games performance where the British team won 65 Olympic and 120 Paralympic medals.
The statement added that both sports will receive funding on a one-year conditional basis and will only continue to receive money should they fulfil the "strict performance criteria".
The amount of money the sports would receive has yet to be decided and will be disclosed in the coming weeks.
"Today's news is absolutely fantastic for the sport, I am overwhelmed to hear basketball have been awarded funding from UK Sport," British basketball player Drew Sullivan said.
"This news puts GB firmly back on the map and on the road to success."
UK Sport also said they would "revisit with Beach Volleyball the costs of operating a small squad programme for two athletes".
"The door is not closed to any sport that has had their funding reduced or stopped," said UK Sport chief executive Liz Nicholl in the statement.
"Every sport has the opportunity to come back to us at the annual review stage to make a case for future funding if they can demonstrate sufficient progress to evidence a credible medal opportunity within the next eight years."
There was no change to the decision to cut all funding from indoor volleyball, table tennis, weightlifting and wrestling with UK Sport stating there was "insufficient evidence" of medal potential for the 2016 Games.
Indoor volleyball, in which Britain fielded men's and women's teams for the first time at London 2012 thanks to host-nation status, could now formally appeal the decision, federation president Richard Callicott said.
UK Sport's "no compromise" approach rewards sports such as cycling and rowing - traditionally strong British medal hopes - with both getting in excess of £30 million pounds for the next Olympic cycle.
- Sports & Recreation