The Department of Health is giving £10m to a fast-track scheme training graduates to become social workers in community mental health teams.
The scheme run by charity Think Ahead aims to recruit 300 graduates by 2018 to work with nurses and psychiatrists.
They will receive specialist training on supporting individuals and families with mental health problems.
Graduates are paid while training on the job and qualify as social workers a year earlier than normal.
Those who secure a place on the scheme become mental health social workers, working with psychologists, nurses and doctors to support the everyday needs of those with mental illnesses such as bipolar disorder, depression and schizophrenia.
The scheme, which opened last year, attracted more than 2,300 applicants for 100 places that start in July.
The government funding will provide money for 200 more places by 2018.
Sarah Carr, who chairs the National Service User Network, said: "Support from a social worker with the right skills and expertise can be transformational for people living with mental health problems.
"The programme gives graduates the skills to empower the individuals they work with - so that they can manage their mental health, stand up for their rights, and find their own paths towards personal recovery."
David Niven, a former chairman of the British Association of Social Workers, said the profession had struggled with too many vacancies and caps to local government funding in recent years, while social workers themselves had faced heavy workloads.
He told BBC Radio 5 live he hoped this scheme would strengthen the profession and that it showed recognition from the government of the value of social work.
Mental health minister Alistair Burt said mental health social work was highly skilled, complex work and the funding would mean thousands of people would be helped to lead more independent and fulfilling lives.
"This is a great initiative to attract the brightest and best into the profession," he said.
Think Ahead says one in three families include someone with mental health problems, deeply affecting their lives and their communities.
'She can read my tone of voice'
Lee Brookes, 39, is a business adviser who has had mental health problems for 10 years, including bipolar disorder and an eating disorder.
He says a good, understanding social worker who listens well is invaluable in coping with his illness.
"My current social worker has been fantastic," he says.
"She can tell from my tone of voice whether the conversation needs to carry on or whether she needs to call back later.
"That works so well for me."
Mr Brookes believes developing mental health social workers will help lots of people in the long run because of the support they provide.
"Social workers have been the most important point of contact during my illness," he says.