The Confraternity of the Blessed Sacrament, founded in 1862, gave the money a year ago to ensure that the ordinariate’s priests would not be left penniless.
It represented almost half of the charity’s assets.
The Charity Commission, however, said the grant was invalid because most of the trustees who agreed to it had a “personal financial interest” in it.
Five out of six of its trustees had already been ordained as priests in the ordinariate.
The commission also ruled that there was “substantial doubt” over whether use of the money would be consistent with the charity’s objects – ”the advancement of the Catholic faith in the Anglican tradition”.
The ruling contradicts the advice lawyers gave to the charity before it approved the grant.
The Charity Commission concluded: “We have been informed that the grant has been returned in full (with interest) by the ordinariate of its own volition.”
The Confraternity has about 120 Anglican clergy members in England and 1,500 worldwide.
It was founded by the Rev T T Carter, a prominent Anglo-Catholic.