The bulk of the money will go towards health, education and early childhood programs.
An investment of $659 million will be made to extend targeted education programs for Indigenous students, on top of a previously announced $44 million in scholarships.
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The total figure also includes $777 million over three years for a commitment to renew the National Partnership Agreement (NPA) for Indigenous Health Outcomes, a figure expected to grow once states and territories announce their joint contribution.
Treasurer Wayne Swan said Indigenous funding was one of the parts of the budget he was "most proud of" ahead of his speech in Canberra this afternoon.
"It's a pretty big investment in Indigenous Australia, not just in the Northern Territory but across Closing the Gap initiatives," he said.
It's not all good news, with funding for a key voice for Indigenous Australians cut in half.
The National Congress of Australia's First Peoples was allocated $15 million over three years, down from $29.2 million handed down to launch the Congress in 2010.
New Indigenous funding announcements made in the federal budget:
- $127.5 million to extend employment programs
- $12 million for additional support for specialised Indigenous legal services
- $15 million over three years to continue funding for the National Congress, starting in 2014
- $6.2 million for upgrades to nine hostels in Queensland and the Northern Territory
- $1.3 million over two years for a developmental study of Indigenous children
