Organisers of the popular three-day event, which begins on May 3, will have to hand over the first £4,000 of any profit made as payment for the lease of Rushmoor Arena.
That will leave the Army Benevolent Fund, which traditionally benefits from the show, picking up the crumbs.
The MoD originally wanted to charge £14,500 for the use of the Arena, together with a further £200 for the hanging of an advertising banner from a bridge over the A325.
In previous years the show organisers have paid just £700 plus VAT to rent the venue.
Committee members met with a representative from the Land Warfare Centre, which runs the Army Training Estate, at Warminster on April 29 in a bid to resolve the issue.
The MoD has now agreed to reduce the bill but will still charge £4,000 on any profit the show makes.
The event raises an average of £6,000 for the ABF, which supports former soldiers and their families. But under current agreements most of that would be wiped out by the debt to the government.
A further £5,000 charge for the help of soldiers preparing for, and during, the show has been cancelled.
Aldershot MP Gerald Howarth is vice-president of the Aldershot Show, which regularly features gymnastic and parachute displays, horse and gundog shows, as well as a variety of arts and crafts stalls.
He has written to Defence Secretary Geoff Hoon asking him to personally intervene to drive the costs down.
Mr Howarth said the MoD's stance could seriously damage the Army's reputation in Aldershot.
He fumed: "The bean counters are running riot. The damage this is going to do to the Army is enormous.
"People go to the show to support it because they know it is for a good cause and they know it is a great occasion for linking the town and the garrison together."
Mr Howarth blasted: "This is one of a number of factors betraying the MoD's inability to secure the proper funding from the Treasury to meet the defence commitments the Prime Minister wants to undertake."
The rental row is the latest problem to hit the Aldershot Show, which last year was postponed until September because of the foot-and-mouth crisis and which was cancelled the year before because the Arena was flooded.
The MoD says it has strict guidelines for the rental of military facilities to the public and must charge the going rate.
The figure could have been reduced if the show organisers had submitted waiver documents but difficulties arose because of the shortened time period between the last two shows.
A spokesman said: "Discussions are continuing to reach the best possible solution for the Aldershot Show while at the same time ensuring that we act within the guidelines for use of publicly funded resources by non-MoD personnel."