It will sell investments worth £12m in firms where more than 10% of revenue comes from extracting thermal coal or the production of oil from tar sands.
The Church said it had a "moral responsibility" to act on environmental issues to protect the poor, who were the most vulnerable to climate change.
The Church manages three investment funds worth about £8bn.
"Climate change is already a reality," said Rev Canon Professor Richard Burridge, deputy chair of the Church's Ethical Investment Advisory Group (EIAG).
"The Church has a moral responsibility to speak and act on both environmental stewardship and justice for the world's poor who are most vulnerable to climate change," he said.
"This responsibility encompasses not only the Church's own work to reduce our own carbon footprint, but also how the Church's money is invested and how we engage with companies on this vital issue."
Analysis: Helen Briggs, environment correspondent
With the global campaign to move money out of fossil fuels gaining momentum, the Church of England's commitment to divest for the first time from the most polluting forms of energy is being seen as a significant step.
The church joins several UK institutions that have already signed up to the movement, including Glasgow University and the British Medical Association. But for some, the announcement does not go far enough.
The Church of England says it will withdraw investments worth £12m from companies that make money from extracting thermal coal - used in generating electricity - or producing oil from tar sands.
This is but a fraction of its total investment portfolio and some are already calling for the church to go further by divesting from all fossil fuels. But the church takes the view that engaging with fossil fuel companies is productive for other forms of energy, such as oil and gas, which may be needed as the world moves towards a low-carbon economy.
The new policy "marks the start of a process of divestment as well as engagement with fossil fuel companies and better aligns the Church's investment practice with its belief, theology and practice", added Bishop Nick Holtam, who is the Church of England's lead bishop on environment.
The Church said it also wanted more intensive engagement with companies that made a significant contribution to global greenhouse gas emissions. It recently filed shareholder resolutions at BP and Shell calling for more transparency over climate change.
Christian Aid's director of policy and public affairs, Christine Allen, said the policy ought to prompt energy firms to rethink their businesses: "The openness to further divestment from intransigent companies must be heard as a final warning to the energy industry: shift investment out of fossil fuels and into renewables or your investors will do so for you.
"Every pound divested by churches, public institutions or individuals is a sign that we are serious."
The Church of England does not directly invest in tobacco, pornography or payday lenders.
Two years ago, it emerged that the Church had indirectly invested in Wonga - which the Archbishop of Canterbury, Justin Welby, admitted to being "embarrassed and irritated" about. It has since ended that investment.

The council backed a French-drafted resolution to send up to 228 police for an initial period of a year.
Burundi earlier said it would accept no more than 50 police officers.
More than 400 people have been killed in unrest since President Pierre Nkurunziza said he would run for a third term in office last April.
More than 200,000 people have fled their homes.
"Given an increase in violence and tension the Security Council must have eyes and ears on the ground to predict and ensure that the worst does not occur in Burundi," said French UN Ambassador Francois Delattre.
"This is a strong act of preventative diplomacy," he added.
The government of Burundi earlier warned it would agree to no more than 50 UN police officers.
Diplomats are now negotiating how to implement the UN Security Council's resolution.
Although both Burundi's opposition and government forces are ethnically mixed, some fear that the violence could descend into a repeat of the genocidal killings which the country has previously experienced.
President Nkurunziza is the former leader of a Hutu rebel group which battled a Tutsi-dominated army for many years until he came to power in 2005 as part of a peace deal.
The Church of England is adopting a new climate change policy and will cut its investments in fossil fuel companies.
[NEXT_CONCEPT]
The UN Security Council has authorised the deployment of a UN police force to Burundi to try to quell violence and human rights abuses in the country.