A suicide bomber killed 22 people and injured a further 119 in an explosion at the 21,000 capacity venue last May during a sold out Ariana Grande concert.
The money provided to Manchester City Council will go towards covering the £120,000 cost of deploying social workers to help children involved deal with trauma.
Six out of 10 children in and around the venue assessed by the council required emotional support, lasting eight weeks on average.
The government's funding package also covers £80,000 for social care costs in supporting families of those arrested. In total 30 children, including an unborn baby, were involved in this extra workload, with one child subsequently entering care.
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