Communities Secretary Robert Jenrick kicked off what officials called a "countrywide town tour" in Wolverhampton - which became a city in 2000 - today.
And Mr Jenrick, who was born in Wolverhampton, said smaller cities are eligible for funding from the scheme.
He said eligibility for the fund is "not as crude as whether one is a city or a town".
"For our Towns Fund, we set the criteria based on population size and that does enable a smaller city like Wolverhampton to benefit,” he said.
But Ms Cooper, who last year wrote for The Yorkshire Post that towns, although the backbone of Britain, were not getting a fair deal said: “We’ve been calling for more investment in towns for years so it’s welcome that the Government has finally admitted we need more investment. But this announcement shows they still don’t get it.”
The Normanton, Pontefract and Castleford MP, who is Chair of the Labour Towns group and along with colleagues launched a new towns manifesto last year, said: “They’ve launched it in a city rather than a town and they are restricting the funding to cities and towns chosen by the Government rather than giving all towns their fair share or reversing any of the cuts in local services we’ve seen.
“So for example in our area I called on the Government to include Knottingley because we badly need new investment, but instead they have left Knottingley out. This is also still too small a scale compared to the billions of pounds cut from services since 2010”.
Mr Jenrick also came under fire from the Mayor of Wolverhampton, Claire Darke.
She told the Guardian: "We have been a city for 19 years and they need to catch up. Are they that out of touch that they did not bother to look it up?
Mr Jenrick announced a separate Town of the Year competition which cities will not be able to enter.
Ms Darke added: "My concern would be that this competition is politically motivated and that they are doing it because there is a tough fight next year to vote for regional mayor for the West Midlands and they are trying to attract support."
However Mr Jenrick said the contest, to be launched later this year, will help make the 2020s "a time of renewal for towns and communities".
The competition aims to celebrate towns' achievements in areas such as entrepreneurship, technology, community, enterprise and integration.
Mr Jenrick has pledged to visit all 100 areas receiving funding under the Government's £3.6bn Towns Fund in the coming months.
The fund aims to help towns to build prosperous futures.
The Cabinet Minister said: "People have put their trust in this new Government and we're making an immediate start to serve local communities and deliver real change, through our £3.6 billion Towns Fund.
"I will visit all these areas in the coming months and make sure they're receiving the practical support and investment they need on the ground."