The IOC Executive Board in Lausanne signed off on the finalised venue locations, saying it was "placing a focus on cost effectiveness, sustainability and legacy," and saving about $100 million in the process.
By moving the track races and mountain bike competitions from Tokyo and into existing facilities in Izu that will be refurbished, organisers now do not have to build, as originally planned, venues for these disciplines in the capital with construction costs in Japan having risen sharply in the past few years.
The road races and time trials will still be held in Tokyo, starting and finishing at the Imperial Palace Garden while the BMX event will also be staged in the capital, in a temporary 5000-seater facility in the city centre.
Athletes in the track cycling and mountain bike competitions will stay at a satellite Olympic Village in Izu while train timetables from Tokyo will be adjusted to fit the competition schedule, said IOC Vice President John Coates, who heads the coordination commission for Tokyo.
"We are satisfied that the bullet train timetable will coincide with the events," Coates told reporters. "We are satisfied that all ticket holders will have the same experience."
"Yes it's two hours away but there is very good transportation in place and with the money saved this is a small inconvenience," Coates added.
The Tokyo Olympics are the first to benefit from a string of IOC reforms approved last year and aimed at making the Games more manageable and less costly.
Among the changes are staging competitions outside the host city if venues already exist somewhere else, lifting the burden on the Olympic host of having to build new venues for each sport and reducing both the budget and the amount of construction work.