The dairy processing sector is set for a €300 million investment over the next few years.
The Minister for Agriculture, Mary Coughlan, said the Government would contribute a third of the finance to reinvigorate the sector if the industry comes up with the remainder.
Ms Coughlan said the much-needed injection of capital would go a long way towards the development of a modern, innovative and highly efficient food sector in Ireland.
She said there has already been a hugely positive response to the initiative from within the industry.
And she said farmers should greatly welcome the investment which should enable them to secure a fair return for their important contribution to the supply chain.
The dairy business remains one of the most important industries in rural Ireland - with exports worth €1.5 billion annually.
The raw material is provided by about 20,000 dairy farmers and the end-product is marketed right around the world.
Despite the success of the industry over the past 30 years, it is now under pressure because of cuts in EU subsidies and stiffer competition on global markets.
Various reports have called for the industry in Ireland to increase scale and to achieve greater efficiency and better use of processing facilities.