First Minister Jack McConnell unveiled details of Project Scotland, which is based on the Americorps model, last week.
It is hoped that 1,000 16- to 25-year-olds will sign up to the new agency each year to undertake community initiatives.
"It is the chance for young Scots to do something exceptional for themselves, their community and their country," said McConnell.
Claire Stevens, director of CSV Scotland, part of the UK's largest volunteering charity, welcomed the decision to introduce financial incentives to volunteering.
"We strongly believe that no young person should be rejected or put off from giving their time by financial or other barriers," she said.
The Executive has committed 1.9m to the scheme in 2004/05 and 3.5m for the following two years. It hopes that by 2008, 50 per cent of costs will come from the private and voluntary sectors.
