The cash forms part of the wider £675m programme to get all local authority services online by 2005.
Local government minister Phil Hope said, "This government is committed to improving public services. And local e-government is all about councils using technology so that they work better. But we need to look further than 2005.”
"Councils are on the front line of local government. We want them to be on the front line of technology as well," he added.
The first round of funding will target projects that involve sharing information and good practice, staff development and better use of e-government to improve services, using e-government to reach people who are socially excluded, and the innovative use of technology to improve services or internal business.
The Office of the Deputy Prime Minister will give local authorities details on how to apply for the funding.