The money is being handed to academics to look at the links between genetics and events in teenagers' lives to see how their mental health is being affected.
The aim is to quickly identify issues such as depression, anxiety, self-harm and eating disorders.
Crucial to the research is better understanding of how teenagers' brains react to challenging events and issues at home, school and the wider world, which can trigger mental health problems.
"Academics will look at external tensions and genetics to ensure mental health problems are being treated as effectively as possible at this crucial age, while the brain is still developing," said the Department for Business, Energy and Industrial Strategy, which is funding the move.
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"Adolescence is often a poorly understood period in our lives, when the brain is particularly sensitive to external influences - while youngsters' social and cultural interactions are rapidly changing.
"Early intervention has a crucial role to play in ensuring young people have quicker, better access to support and treatments."
Business Secretary Andrea Leadsom added: "The £35m government-backed research programme we are announcing today will look to better understand why so many teenagers face mental health problems, and how we can better support, detect and treat them."
The funding is for research over the next five years and will test issues with teenagers' biological background as well as their relationships and achievements at school.
The research funding is open to universities, businesses as well as public sector researchers.
YoungMinds chief executive Emma Thomas welcomes the funding but hopes further action is taken across government to support young people's mental health needs.
"We know from young people we work with that the factors that can lead to poor mental health are often complex, but that difficult experiences at a young age - like bereavement, bullying or abuse - can have a huge impact," said Thomas.
"It's really important that we have clear evidence about how the circumstances children grow up in affect their mental health, and about what forms of support make the most difference.
"While we undoubtedly need investment in NHS mental health services, we would also hope that this research would lead to further action across government and across society to address the crisis and make early support a priority."
This is the second major investment into adolescent mental health research this autumn. Last month The Wolfson Foundation announced plans to set up the £10m Wolfson Centre for Young People's Mental Health at Cardiff University.
The centre will study how anxiety and depression arise in young people and exploring the most effective treatment and support.
Last month it emerged that there had been a marked increase in the number of children dying by suicide. In 2018 there were 188 suicides among 10- to 19-year-olds, compared with 165 the year before.
According to the government one in eight children and young people have mental health issues.