The Department for Education (DfE) has announced it will stump up £1.5m to help young people develop support networks and talk about mental health.
Part of the cash will support a digital innovation fund that will be used to provide new online resources for parents and young people such as mobile phone applications.
It has launched a consultation to get the views of young people and organisations working within education or mental health on what help is required to set up peer support networks.
The consultation is also intended to gather views on the approaches that are currently available in peer support, and how things might be improved.
Education Secretary Nicky Morgan said schools should be having open conversations about mental health issues to tackle stigma.
"The truth is that the people who best understand the pressures that young people face are their classmates and friends - they’re the ones that spot the telltale signs that their friends are experiencing problems, and the people to whom children are most likely to turn for support," she said.
"That’s why today’s announcements are about giving young people the training they need to spot the signs of mental health issues and get the support they need. To do that we will be working with schools, mental health experts, charities – and most importantly young people themselves."
The DfE has also confirmed that an advisory group, first announced last year by childcare minister Sam Gyimah, has now been launched.
The group of experts and young people will use the results of the consultation to develop peer support pilot schemes, the DfE said.
It will also gather evidence from pupils in schools that run successful peer support programmes, so the approach can be extended to thousands of schools across the country.
Gyimah said the government is at a "turning point" with tackling young people's mental health issues.
"I am excited to announce this funding to help encourage young people to champion each other’s mental wellbeing, and work together to promote good mental health," he said.
"I have met some impressive young people who have shown that peer support can work really well, and I want to see more of this high-quality support benefiting young people up and down the country."
Natasha Devon, the DfE's mental health champion for schools, told CYP Now there is evidence peer support can be "incredibly effective" in preventing and treating mental illness, but added that it should not be used in isolation.
"It must be used as part of a spectrum of different interventions – we cannot expect young people to simply look after themselves," she said.
"What is really positive about the government’s approach to this is they have made an open call for evidence and suggestions from the education industry, so they can get a feel for peer-to-peer programmes that are working currently.
"I also like the idea of using technology, as not every young person has the confidence to articulate themselves verbally, and feel safer opening up online or by text.
"My feeling is the most sensible approach is to observe a school environment, see who pupils naturally gravitate towards – it might be a football coach, dinner lady, or a sixth-former – and then equip that person with the tools they need to have those conversations in the safest and most effective way possible."
The consultation is due to run until 24 march.