The NHS Long Term Plan, published today by NHS England, promises to help 345,000 more young people through community-based services including schools and colleges.
Crisis care, early intervention, and a "continuous care" approach that provides mental health support through to age 25 are also key areas set to benefit from the plan, which recognises that "between the ages of 5-15, one in every nine children has a mental disorder".
A key government goal is to ensure that 100 per cent of children and young people who need specialist care can access it.
The plan injects £2.3bn into wider mental health services as part of a raft of ambitious improvements, including to maternity care and cancer testing.
The long-awaited news comes amid ongoing sector demands for a "parity of esteem" - for mental health to be given the same status as physical wellbeing. Currently just a fraction of the NHS budget goes to child and adolescent mental health services (CAMHS).
Centre for Mental Health chief executive Sarah Hughes praised the plan's commitment to extend access to mental health support to "more children, young people and young adults up to age 25".
But she cautioned that a radical redesign was needed to have the most effective impact.
Hughes added: "For too many young people, mental health support is offered too late, with too many restrictions, and then they are forced to start again when they reach 18.
"We hope the NHS will radically redesign its mental health offer to young people so that it reaches out sooner, makes help-seeking much easier and friendlier, and provides consistent help into adult life."
James Kenrick, chief executive at advice and counselling network Youth Access, also welcomed the community-led approach, but highlighted how cuts to services in recent years will make the investment harder to feel on the ground.
"Despite the additional investment, however, the NHS faces significant resource, workforce and logistical challenges in delivering the plan, not least because of cuts to public health and youth services," said Kenrick.
He added that "huge culture change" is needed if the "if investment is to shift to the person-centred models of care that young people demand".
Kenrick continued: "Local commissioners will need to systematically embrace a bigger role for voluntary sector providers if the laudable ambitions in the plan are to be achieved."
Anne Longfield, the children's commissioner for England, called for more ambitious government aims and warned that despite the boost "thousands of children" will still fail to receive the help they need each year.
She said: "The government must be more ambitious and its aim should be for a CAMHS system that helps every child suffering from a mental illness, not just some.
"That will require bolder policies like an NHS-funded counsellor in every school to identify and tackle problems early, and closer parity between what is spent on adult and child mental health services."
Emma Thomas, chief executive of YoungMinds, said: "This investment into tackling the scale of children and young people's mental health is vital and long overdue.
"Right now, over a million young people have a diagnosable mental health problem, and the vast majority aren't able to access mental health support from the NHS."
Thomas said that workforce issues must be "properly addressed and funding reaching frontline services" to ensure the ambitious proposals become reality.
She added: "With a rising scale of need, and hundreds of thousands of young people still unable to access support, the government must also look beyond the NHS to provide non-clinical, preventative support locally for every young person who needs it."