Schools should compete to find the best way of spending the pupil premium - and could win an extra £10,000 for being the top performer, Nick Clegg will tell teachers on Monday.
Pupil Premium Awards of up to £10,000 will be handed out to 50 schools as the Government searches for the teachers best using the extra cash.
The Deputy Prime Minister will set out his proposals for delivering the money by telling educators he wants to "strike a deal between the coalition Government and our schools and teachers".
Other proposals include funding of £500 per pupil for summer schools to bridge the gap between primary and secondary education, and career incentives for teachers willing to work in schools with large numbers of disadvantaged pupils.
The pupil premium is an additional amount of money paid to schools for children on free school meals and looked after children. This year it is worth £600 per child and the total spend by 2015 will by £2.5 billion a year, across 1.8 million children.
Clegg will speak at an Islington primary school to lay out his plans.
He is expected to say: "So we've made the case for the pupil premium. We've won the battle to get it properly funded.
"Today I want to talk about how we make it a success because we now have a once in a generation chance.
"Get this right and we make good on education's progressive promise: To give every child the chance to go as far as their abilities and effort can carry them.
"And we'll achieve something else of lasting importance: We'll prove that teachers do best when Whitehall steps out of the way.
"To that end, I want to strike a deal between the coalition Government and our schools and teachers: We'll give you the cash; we'll give you the freedom; we'll reward and celebrate your success.
"But in return, we want you to redouble your efforts to closing the gap between your poorer pupils and everyone else.
"We won't be telling you what to do, but we will be watching what you achieve."
Clegg will say different schools will spend the money in different ways and Whitehall will not micro manage the pupil premium's operation.
But central government will research the best uses of the money and "ensure the evidence is spread through the system".
Clegg's speech has been organised by the National Education Trust.
The Liberal Democrat leader campaigned at the 2010 general election with the pupil premium as one of his flagship policies on the cover of his manifesto.
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