Birmingham's struggling social services department is to receive a £34.7 million credit to spend on four new centres for older people.
Health Minister Liam Byrne, MP for Birmingham Hodge Hill, said the money would help fund the capital costs of the centres.
They will be developed by the city council in partnership with a private company to provide people over 65, including those suffering from dementia with access to residential and day care, intermediate care and respite care.
The social services department, which went more than £20 million in the red last year, has been classed as a "no stars" achiever by the inspectors - the lowest possible rating.
But last week the Commission for Social Care and Inspection announced services for children had started to improve.
The new centres, which will provide 256 places, are needed to meet the demands of an increasingly elderly population, Ministers believe.
There are also concerns that the quality of care offered by existing residential homes is poor, and in particular that they suffer from staffing problems.
Mr Byrne said: "After a lifetime of service to their community and country, they deserve top quality care.
"My priority as a Minister for Care Services is to ensure every older person in this country is treated with dignity and respect. Centres like these in Birmingham are one of the ways we make sure this happens."
The funding is part of a Government allocation to five councils across England totalling more than £125 million, including £22.6 million for Wolverhampton, which will be announced today.