Dorset County Council is to use the money to recruit 20 additional social workers, who will help reduce caseloads, support families in crisis as well as prevent re-referrals.
The local authority hopes that the investment will deliver £1.5m of savings in 2018/19, based on a predicted reduction in the looked-after children population from 440 to 390.
It is hoped that the number of children in care could be reduced even further, to 346 in 2019/20, generating further savings of £1.32m.
In documents presented to the council's cabinet, which has rubberstamped the proposals, it is estimated that the additional social workers will allow caseloads to be reduced to around 15 per social worker.
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