UK Aid Direct replaces the Global Poverty Action Fund
Up to £30 million a year will be available from the Department for International Development (DfID) for small-to-medium size charities working on projects abroad.
DfID said the UK Aid Direct fund will run for five years with a budget totalling £150m.
Charities which have earned £1m or less over the last three years are eligible to apply.
Small charities can apply for up to £250,000 while larger ones will receive maximum funding of up to £4m.
The organisation said it expects 10% of the funding available will be allocated to small civil society organisations.
Aid Direct replaces the Global Poverty Action Fund but intends to be more flexible with DfID planning to promote the scheme better to smaller charities.