Ford's UK operations will receive £360m loan guarantees from the Automotive Assistance Programme in support of the carmaker's development of green vehicle technology.
Business Secretary Lord Mandelson announced the Government support this morning while visiting Ford's Dagenham plant. The guarantee will back a proposed loan of £450m from the European Investment Bank.
Ford has proposed £1.5 billion investment over five years in developing a new generation of environmentally friendly engines and technology.
Ford's plans will safeguard around 2,800 skilled jobs in the UK at its research and development centre at Dunton in Essex as well as its manufacturing plants in Dagenham, Southampton and Bridgend in South Wales.
Ford currently provides 29% of the UK's automotive sector research and development.
The projects to be supported cover research and development for Ford's commercial vehicles such as the Transit and Connect vans and the development of low carbon emission diesel and petrol engines.
This includes investment in production facilities for new lower carbon engines in Bridgend which was also supported by the Welsh Assembly Government last year.
Currently 25% of all Ford engines worldwide and over 50% of all Ford diesel engines are made in the UK
Lord Mandelson said: "Ford is a major investor in research and development in the UK. Its proposals represent further significant investment in the UK. The Government stands ready and willing to support these innovative R&D projects backed by a highly skilled workforce.
"As part of the automotive industry, Ford has an important role to play in the UK's aim to be one of the leading manufacturers of low carbon vehicles."
Ford chairman Joe Greenwell said: "Ford welcomes this positive support from the Government. It greatly assists in delivering Ford's commitment to invest over £1.5 billion in new, affordable, volume-produced low CO2 technologies."