Paramount
Angelina Jolie played Lara Croft in the "Tomb Raider" movies.
The Video Games Prototype Fund from the Department for Media, Culture and Sport (DCMS) is designed to help video game companies get their concepts "off the drawing board and into production".
Grants of up to £25,000 will be offered to early stage video game companies from now until 2019. These grants are designed to help new and young gaming companies create working prototypes. A limited number of £50,000 grants will be given to video game companies looking to go beyond the prototype stage.
The government claims that the video gaming industry is one of the UK's biggest success stories and it used the launch of the new fund to highlight the nation's previous successes in the field.
Early releases in the "Grand Theft Auto" series, for example, were largely created by a team of programmers at Rockstar North in Scotland, while the "Tomb Raider" series was originally developed by London-headquartered Eidos Interactive.
The government said it wants to ensure that the UK continues to create games like "Runescape," "Monument Valley," and "Candy Crush."
Minister for Culture and the Digital Economy Ed Vaizey said: "Britain's video games punch well above their weight internationally and we need to build on this and invest in the strength of our creativity.
"This fund will give small businesses, startups and individuals the support they need to better attract private investment and go on to create the blockbusters of tomorrow."
A report published last September found there were 1,908 video gaming companies in the UK. It also identified 12 gaming hubs. They include: Brighton, Cambridge, Cardiff, Dundee, Edinburgh, Guildford and Aldershot, Liverpool, London, Manchester, Oxford, Sheffield and Rotherham, and Warwick and Stratford-upon-Avon.
According to the DCMS, the UK's video games industry currently generates more than £4.5 million a day for the UK economy and directly employs more than 19,000 people.
Ian Livingstone CBE, fantasy author and video games entrepreneur said: "The UK has a long history of developing world-class video games. From Elite and Populous to Tomb Raider and Grand Theft Auto to Runescape and Moshi Monsters to Monument Valley and Plunder Pirates, UK games have made a significant cultural and economic global impact. This fund will encourage and incentivise new talent to carry on that important legacy."
The fund will be managed by the UK Games Talent and Finance Community Interest Company and will explore joint initiatives with organisations such as Digital Catapult, BAFTA, Ukie, Tiga, Creative England, Creative Scotland and BFI.