Under the broadcaster's plans BBC3 would replace BBC Choice, its current offering for the 16- to 34-year-old market. BBC4 will replace BBC Knowledge and the children's channels will air during the day.
An internal memo was sent out to BBC staff this afternoon, explaining that the two daytime children's channels and highbrow arts channel, BBC4 can go ahead.
The BBC said although the decision on BBC3 was a blow, it intends to work "further on the proposal".
News of the decision leaked out early, ahead of a speech by Culture Secretary Tessa Jowell at the Royal Television Society this evening.
Jowell had been set to give the BBC its long-awaited decision at the Edinburgh television festival two weeks ago, but she had to pull out because of a personal tragedy.
The BBC has been waiting for a decision from the Government since the beginning of the summer. An announcement was first delayed until after the general election in June, then the Government ordered a second round of consultation.
The decision will come as a bitter disappointment to the commercial children's TV sector which had vehemently opposed plans for two children's daytime TV channels, one of which is for the pre-school age group and the other for six- to 13-year-olds.
Commercial broadcasters, understood to include Nickelodeon and BSkyB, mounted an unsuccessful legal challenge. They are seen as being threatened by the strength of the BBC's children's output, which includes characters such as the Tweenies, Bob the Builder and the Teletubbies.
The BBC believes its proposed free-to-air digital channels and radio stations will help speed up the move to digital. The Government wants to switch off the analogue signal by 2010, although this target is looking increasingly unachievable as a significant chunk of the population does not want to pay for digital services.
The BBC has suggested that if these people are provided with free digital receiver equipment they will be able to access the BBC's offering because it is free, and will have already been paid for by the licence fee. The broadcaster believes this would go some way to appeasing those people who are opposed to the prospect of digital TV.
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