The Advice Services Transition Fund will provide funding over a two-year period from 2013/14 and will encourage more collaboration.The closing date for applications is 28 January.
Grants will range from £50,000 to £350,000. To qualify, advice charities will be required to form partnerships and demonstrate how they will work collaboratively to ensure the long-term sustainability of their services.
Steve Johnson, chief executive of Advice UK, gave a cautious welcome to the funding: "We are pleased that the government acknowledges that advice services are a vital part of our national infrastructure and wishes to support a transformation to services that deliver earlier intervention, prevention and tackle preventable systemic failure."
But he said the transition funding did not replace the £50m plus that would be lost from cuts to legal aid cuts next year and the local authority funding cuts to many advice services. Applying for funding would "clearly present challenges for local advice services given the emphasis on partnership and collaborative bids".
A spokeswoman for Citizens Advice, the national body for Citizens Advice bureaux, said: "The Advice Service Transition Fund will help Citizens Advice bureaux up and down the country continue to innovate and adapt to make sure that people get the advice they need when they need it."
The launch of the fund coincides with the launch of a Cabinet Office report that reviews the current and future working of the not-for-profit advice sector.
The report, Not-for-Profit Advice Services in England, concludes that diversity of funding and more collaborative working between advice service charities is needed to improve sustainability.
In a foreword to the report, Nick Hurd, the Minister for Civil Society, said: "The current economic climate has led to a reduction in public funding but an increase in demand.
"This means that we must consider how advice services can adapt to the new environment; achieve more through collaboration, early intervention and exploitation of remote channels; and deliver high-quality services that are sustainable in an environment of reduced funding.
"I understand that it takes time, money and the right skills to transform organisations. This is why the government is providing new funding to help not-for-profit advice providers to continue helping their clients while redesigning their services to reflect the new financial realities."