Youth workers in two pilot areas will go into prisons and spend time helping young offenders in custody deal with problems such as low basic skills and substance abuse.
Workers from Denbighshire County Council and Bridgend County Borough Council will spend three days a week working with offenders in Ashfield or Stoke Heath young offender institutions.
Support continues after the young person leaves custody to reduce the chances of reoffending. The youth workers also work with young people's families and agencies outside prison that could help them after release.
The project will work through Young People's Partnerships, multi-agency groups that represent teenagers' interests in Wales.
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