The bag was found at a property in Haxby Road in August, prompting a police investigation.
Detectives thought it may be criminal property but they can find no evidence of that and the money has now been awarded to St Thomas with St Maurice in Lowther Street in The Groves, which owns the property where it was found.
Eleanor Course, from the Diocese of York, said the church would use the money in the local community, but detailed plans are yet to be drawn up. She said: “It’s great news for the church”.
The money is two and a half times the £40,000 that the church usually raises in income each year.
The bag was found on a Tuesday morning in August, which coincided with a bin-collection day in the neighbourhood.
The householder, who is keen to remain anonymous, found it and alerted police.
Detective Inspector Andrea Kell from York CID called it a “very unusual find” and urged anyone with information to come forward, but the mystery remained unsolved.
A hearing was held at York Magistrates Court to decide what should happen to the money, and it was awarded to the St Thomas with St Maurice church council, in line with the Police Property Act 1897.
The church already hosts toddlers and childrens groups and has a vibrant student membership, being close to York St John University.
Martin Crosby, chair of The Groves residents’ association, welcomed news that the money would be spent in the community.
He said two worthy local causes could include York Arc Light Project in Union Terrace, which provides accommodation and support for homeless people, and Door 84, a youth club in Lowther Street which caters for eight to 17-year-olds and also doubles as a broader community centre for some events.
After police ruled out a criminal link to the money, it became subject to their lost and found procedure, and the court determined that the funds should be allowed to be the property of the finder.
A North Yorkshire Police spokeswoman said: “An investigation was carried out to see if the money was linked to crime. No definite link to crime has been established and there is insufficient evidence for the money to be forfeited under the Proceeds of Crime Act.”