Called Staying Close, the scheme stops short of offering those in residential care the same right to stay in care until they are 21 as those in foster care receive under Staying Put arrangements.
However, Education Secretary Nicky Morgan has pledged the scheme will mean "care leavers will no longer have to face life's milestones alone - be it applying for university, getting a job or finding their first home".
Funding from the Department for Education's Children's Social Care Innovation programme will be used to pilot models of Staying Close, children's minister Edward Timpson has confirmed in a written statement to parliament today.
Staying Close is to be a cornerstone of a children's social care policy paper called Putting Children First, published today in response to a review of residential child care, carried out by former government adoption adviser Sir Martin Narey.
In his statement, Timpson said the policy paper will "create the conditions to enable government, local authorities and their local partners, social workers and other professionals such as foster carers to provide consistently excellent children's social care".
The Narey review, also published today, praises the quality of care provided in many homes but says more can be done to help the residential care sector support young people.
The government has also pledged to introduce a specific funding stream as part of the £200m innovation programme "to test innovative ideas for using residential care in a more dynamic and creative way to support those children who can benefit", adds Timpson's statement.
A full government response to Narey's report is expected in the autumn.
In January, Narey said rolling out Staying Put to ensure those in residential care could stay in homes until they were 21 could cost in excess of £500m.