The Scottish Government’s Promise Partnership Fund will continue to 2024-25, with £4 million provided each year.
Children and young people who have experienced care will have a say in the final funding decisions.
The fund, which launched earlier this year, will open to bids from private, public and charity organisations.
Deputy First Minister John Swinney also welcomed the publication of a report from The Promise, the organisation tasked with bringing about change in the care system.
Mr Swinney said: “The Promise Partnership Fund is important because it provides additional resources to help organisations make the changes needed to enrich the lives of children and young people in or on the edges care.
“I have written today to Fiona Duncan, chair of The Promise Scotland, welcoming publication of the Change Programme and committing to using that document as a lever to accelerate real and meaningful change to #KeepThePromise.
“We will continue to work with The Promise Scotland, with service partners and importantly children and families to ensure we drive forward the transformational change that is required to make Scotland the best place to grow up where all children are loved, safe, respected and realise their full potential.”