Up to 10 hubs connecting local authorities, social workers and virtual school heads, with independent and boarding schools, will be established in late 2019.
These will support children in care by offering them residential school placements, or other non-residential opportunities available at partner schools, such as mentoring, tutoring or activities in the school holidays.
Looked-after children can already be placed in boarding schools, but numbers are relatively low. A 10-year scheme between the Boarding Schools Partnership - a DfE funded group of schools and education experts and charities - and Norfolk County Council reported reduced levels of risk for 37 out of 52 vulnerable children placed in boarding schools between 2008 and 2018 in Norfolk.
Of 17 children who were in care at the start of the scheme, nine (52.9 per cent) were no longer looked-after by the end.
Children's minister Nadhim Zahawi said the scheme will provide "stability" for children in care.
"Children in care often find themselves marginalised, struggling to make a success of themselves at school through no fault of their own but because of the chaotic start to their lives," he said.
"We need to dream much bigger for these vulnerable children and raise ambition and belief in what they can achieve - whether that means school scholarships, mentoring or help applying to university.
"Many independent schools are already putting this in action, so this new scheme will help even more provide that stability."
The DfE said it will open a tender for local authorities and primary and secondary schools interested in forming hubs in early 2019, although it has not confirmed whether any funding will be available to facilitate their creation.
No schools or councils have announced their intention to take part in the scheme. However, Highgate School head teacher Adam Pettitt, part of the hubs working group, backed the plans.
"Too often young people find themselves shut out of the higher education and employment opportunities that are accessible to peers who have not experienced traumatic experiences in their young lives," he said.
"Highgate's long-standing Chrysalis Accelerator programme provides a model for other independent schools to consider when exploring ways to engage with these especially vulnerable young people.
"Independent day schools have a tremendous amount to offer these young people and our hope would be to see the Chrysalis Accelerator inspire other independent day schools to adapt their framework to set up similar programmes across the country, responding to areas of particular need on a local level."
The Boarding Schools Partnership, which will continue its work separately to the hubs, has 59 members including top independent schools Eton College and Rugby School.