The Housing minister, Hilary Armstrong, announced that the "winter shelter programme" would help voluntary groups to provide more than 500 beds nationwide.
The cash package, which will centre on London, Bristol, Cambridge and Brighton, will offer emergency hostel spaces as well as advice on drugs, alcohol and mental illness during the coldest months.
The new money was a crucial part of the Government's drive to reduce the number of people sleeping on the streets by two-thirds by 2002, Ms Armstrong said. More than pounds 34m will be spent over the next three years on grants to charities and other voluntary groups in an attempt to meet the target.
The number of people sleeping on the streets in London still averages about 290 a night and charities warn that many are at risk if they remain unhoused at sub-zero temperatures.
A pounds 200,000 Department of Health programme will also offer specialist help for those sleeping rough who have mental health problems.
Admiralty Arch, across The Mall in central London, which housed homeless people last winter after a high-profile launch by the Deputy Prime Minister, John Prescott, will not be used in the programme, but other government buildings will.
Ms Armstrong said the scheme would offer vital emergency help to those who slept rough at a time of year when they were most vulnerable.
"People should not need to sleep on the streets in this country," she said. "Working with voluntary organisations, we can offer not only shelter but the opportunity of a fresh start, with help to find permanent accommodation.
"Our commitment is absolute. The number of people sleeping rough must be cut by two-thirds by 2002."
The new pounds 34m programme is part of Labour's alternative to the rough sleepers' initiative, launched by the last Tory government, which spent pounds 250m on hostel beds over seven years.