The announcement from Sajid Javid at today's Conservative Party conference in Manchester, adds detail to his Spending Round pledge earlier in September.
The money is geared towards building new youth centres, refurbishing exciting youth facilitates and to provide mobile facilities for harder to reach areas.
The fund also aims support the provision and coordination of high-quality services for young people and an investment in the youth workforce.
The funds will go some way to reverse growing council cuts to youth services since 2010, which are estimated to stand at more than half a billion pounds.
Last week the YMCA released figures suggesting that council spending on youth services across England had fallen 69 per cent between 2010 and 2019 and looked set to reach its "lowest in a generation".
The analysis of 84 local authorities revealed how in 2010 average spend per council was £7.79m, with planned average spend for 2019/20 being just £2.45m.
Youth sector representatives including the National Youth Agency (NYA) welcomed the announcement.
The NYA tweeted that it was ready to work with young people and government to "develop concrete proposals and a clear timetable".
The Chancellor, @sajidjavid, today announced £500million investment in youth services over 5 years.— NYA (@natyouthagency) September 30, 2019
Here's a cross-sector statement signed by @LeighNYA and other CEOs from across the Youth Sector pic.twitter.com/6c2LmjlB7w
Amanda Chetwynd-Cowieson, chair of the British Youth Council said the organisation is "delighted" after fighting the cuts since 2010.
"Young people should have access to youth services, regardless of where they live," added Chetwynd-Cowieson.
"We've been asking the government to recognise the value of youth services for almost a decade because so many young people rely on these services.
"We know that young people face a multitude of issues. Youth services can play an integral role in creating a fairer, safer and stronger environment for young people."
Javid said: "We need to do more to level the playing field between regions and generations, and give all young people the very best start in life.
"This ambitious £500m programme will roll out youth centres and services right across the country, helping millions more young people get on the conveyor belt to a better life and a better career."