The money will fund six of London 2012's major cultural projects, including an international Shakespeare festival, a UK-wide film project for young people, and a huge music festival in London just before the Games.
Chief executive of the Royal Opera House Tony Hall will chair a new Cultural Olympiad Board to ensure the programme moves forward.
"The 2012 Olympic and Paralympic Games are a once-in-a-generation opportunity to stimulate the extraordinarily fertile creativity there is in London and throughout the UK," said London Mayor Boris Johnson.
"This funding is a tremendous boost for the Cultural Olympiad, which will be an exciting shop window for our creative talent and the cultural sector as a whole."
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