The three-year 4.2m programme will work with prisoners and ex-prisoners aged 18 and above, but much of the work will focus on the 18 to 25 age bracket.
Rob Williamson, assistant director of policy and communications at the foundation, said: "This is a major investment and we want the lessons learned from this to influence future policy decisions."
The foundation is giving funding to organisations with expertise in working with offenders, so they can run projects in the northeast of England.
Prisoners and ex-prisoners in Castington and Deerbolt young offenders' institutions will take part.
Youth homelessness charity the Depaul Trust, crime reduction charity Nacro and crime prevention organisation the No Way Trust will run projects.
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