Childcare providers will be asked to offer places to families eligible for childcare tax credits at a rate deemed affordable by the London Development Agency (LDA), which is to run the Childcare Affordability Programme.
They will then be offered a subsidy but there will be a ceiling on how much cash they will get toward their usual fee.
The programme, more details of which are to be announced next week, will be funded by the LDA up to 2008 with 5m announced in the Government's 10-year strategy for childcare to come from the Sure Start Unit.
Meanwhile, more details of the Children's Workforce Strategy have emerged.
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