The additional cut comes after a £2m reduction in subsidies in 2014 and takes the annual budget for supporting uneconomical routes to £1.5m a year.
North Yorkshire County Council said the saving was required to meet government spending targets, which will see its central grant reduce by £75m by 2019.
It denied campaigners' claims there would be a "massive impact" on people.
The council carried out a consultation on the proposal over the summer.
Martin Abrams, from the Campaign for Better Transport pressure group, claimed the reduction would have a "massive impact" on passengers.
"We completely understand the financial difficulties that local authorities, are facing " he said.
"But at the same time it seems that counties like North Yorkshire seemingly have very little care for bus services that serve the needs of people across the county."
Don Mackenzie, the Conservative councillor responsible for public transport, said it was a "difficult decision" to make the savings.
Mr Mackenzie said he hoped the impact of the budget cut would be minimised by converting some subsidised routes into commercial operations and by expanding community transport schemes.
"Bus transport is a lifeline for very many people," he said.
"Whilst we are seeing a £500,000 reduction in our budget, services are not going to be affected to any very great extent."
A further cut of £500,000 will be made to the council budget for supporting rural bus services in North Yorkshire.