The Growing Places Fund will be made available for projects that will help "facilitate economic growth, jobs and housebuilding", such as improved transport links and flood defences.
Each local enterprise partnership (LEP) will be able to apply for funding before making a decision about what schemes to prioritise locally, the Government said.
The money will be allocated from the end of January 2012 by the Department for Communities and Local Government (DCLG) and Department for Transport (DfT).
Communities Minister Eric Pickles said that the fund would "unlock much-needed local infrastructure".
"It will be Local Enterprise Partnerships, made up of the people and businesses who know their local areas best, who will decide where this cash boost will be spent. I now want to see these partnerships coming together and finding innovative ways to unlock local sites and help get Britain building again," he said.
The 38 LEPs are led by local authorities and businesses across "natural economic areas" in England to stimulate economic growth. They were established by the Coalition Government to replace the previous regional development agency regime.
The Growing Places Fund was announced by Treasury Secretary Danny Alexander at the Liberal Democrats conference in September. It will be jointly administered by the DCLG and DfT and is intended to help establish "sustainable revolving funds", the Government said in its Growing Places Fund prospectus. The projects facilitated by these funds should provide returns which can then be reinvested locally, it said.
"Our view is that this is a major opportunity for local areas to establish a recycling fund - as projects unlock development, the developers would use a proportion of land value uplift or financial receipts to repay the public sector outlay. In other places other contractual models could be used for investment recovery. Initial funding could be recouped or interest paid and recycled into new infrastructure projects," the prospectus said.
"We need to know that local partnerships are committed to using the fund for the provision of infrastructure to unlock jobs and housing, and will target projects which represent good value for money."
Before applying for finance, LEPs will need to demonstrate that they are committed to using the money to "generate economic activity in the short term", the Government said.
The Government has published a provisional breakdown of how the money will be split between the LEPs.