Schools are to take a greater role in appointing staff and making arrangements for pupils whose first language is not English.
A new funding regime, to be announced later this month by the Department for Education and Employment, will see the annual Pounds 83 million Section 11 money - used for helping ethnic-minority children - move from Home Office control to the DFEE.
The department has told local education authorities that under the principles of fair funding, a significant amount should be devolved to schools.
The Government said that next year (1999-2000), local authorities can expect the same allocation. But after that, the DFEE intends to move to a new formula, and will consult widely on the proposals.
Tony Blair pledged in 1997 to restore the Section 11 grant which had been hit by Tory cuts. The cash will be put into a new DFEE Standards Fund and be used as part of the Government's agenda to raise standards and end social exclusion.
The DFEE's letter to education authorities said the changes will "ensure schools have a significant role in effective management of this work, including appointing additional staff and purchasing appropriate resources . . . raising ethnic minority achievement".
Most Section 11 teachers are employed in local authority units and work with a range of schools.
Doug McAvoy, National Union of Teachers general secretary, said: "I welcome the Government's commitment to Section 11, but devolution of funding could put at risk existing services. I call on the Government to guarantee that jobs will be protected."