Free sanitary products will be distributed via community groups, schools and food banks in a bid to tackle "period poverty" across Wales.
Leader of the House Julie James AM said councils would share a £1m fund to help "those who need them most".
She said she had heard reports mothers were going without so their daughters could buy sanitary products and it was "unacceptable".
"Period poverty" campaigner Rachel Garrick said it was "wonderful" news.
The Caldicot town councillor said it was "devastating" women faced "monthly exclusion from society because they can't afford to menstruate".
The funding will also be used to improve toilet facilities in schools.
Cabinet Secretary for Education Kirsty Williams AM said: "The physical, emotional and mental health of our pupils is paramount.
"This funding will help ensure that these facilities in our schools meet the needs of young women and girls.
"We want all our young people to reach their full potential both inside and outside the classroom and this funding will help to ensure they feel properly supported."