The new changes mean that all major decisions will now fall to a government department.
The changes, due to come into force on January 1, 2017, follow reports in local media that sports-mad Prime Minister Viktor Orban was unhappy with the Hungarian team's performance at the Olympic Games in Rio in August.
Until now, the national Olympic Committee (MOB) had been in charge of budget planning and allocation for all competing sports branches.
It was also responsible for appointing the heads and senior figures of Olympic sports federations.
But the new changes, approved by a large majority of lawmakers, mean that all these major decisions will now fall to a government department.
Historically an Olympic powerhouse despite a population of less than 10 million, Hungary won 15 medals in Rio -- eight golds, three silvers and four bronzes -- and finished 12th in the medal table.
Three sports only -- swimming, canoeing, and fencing -- accounted for all but one of the medals though, with two athletes, the swimmer Katinka Hosszu and canoeist Danuta Kozuta, taking home three golds each.
Since coming to power in 2010, 53-year-old Orban has hiked state spending on sports, particularly on football, and has also championed Budapest's bid to host the Olympic Games in 2024.
Next September the International Olympic Committee is due to decide which of the three candidate cities -- Paris and Los Angeles are also in the race -- will be awarded the event.