The announcement was made by Health Minister Tony Abbott, who is visiting Alice Springs.
Mr Abbott said the funding would enable all 10 fuel stations in the Northern Territory town to replace regular unleaded petrol with non-sniffable Opal fuel.
"By supplying petrol bowsers in Alice with non-sniffable fuel, sniffers will be deterred from travelling into Alice Springs," Mr Abbott said.
"Cutting out supply will make it much harder for sniffers to get access to petrol."
Opal fuel is currently available in 59 Aboriginal communities and 14 roadhouses and the government has previously committed to a rollout of Opal to an extra 33 sites.