The government is pledging to dismantle 2,000 county lines gangs as part of a drugs policy overhaul.
The £300m commitment is one proposal in the new 10-year drug strategy for England and Wales.
Policing minister Kit Malthouse said the total funding would be £900m over three years, including major investments in treatment.
Other planned measures include using drug dealers' seized phones to message their clients to discourage drug use.
Mr Malthouse said the strategy would be "ruthless" in tackling drug supply while addressing demand, offering treatment as well as punishment to heroin and crack addicts.
He said the government also wanted to tackle "lifestyle users, who think their drug use is without consequence but it is actually causing murder, mayhem, misery and degradation in other parts of society".
Labour said reforms were "long overdue" and cuts to police budgets had allowed gangs to grow.
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County line gangs are urban drug dealers who sell to customers in more rural areas via dedicated phone lines.
They are notorious for exploiting children to work as couriers and forcing vulnerable people to let them use their homes to conceal or deal drugs.
The government said operations targeting these gangs had led to the closure of 1,500 lines so far, with more than 7,400 arrests and more than 4,000 vulnerable children and adults safeguarded.
Also included in its strategy, which is due to be published in full later on Monday, is the expansion of testing on arrest, with police forces being encouraged to direct drug users towards treatment or other interventions.
Judges will also be given the power to order testing on anyone serving a community sentence for drug-related offences and those who test positive could be jailed.
In an interview with the Sun on Sunday, Prime Minister Boris Johnson suggested the government would "look at" taking away the passports and driving licences of "lifestyle" drug users who fed the demand for the trade.
EPABBC home editor Mark Easton said government messaging had been focused around the criminal justice response to drugs.
But he said one major question about the strategy was whether the funding for treatment and recovery matched the £396m needed over three years, according to a review of drug policy by Dame Carol Black.
In July, the review found the current system was "not fit for purpose and urgently in need of repair".
There are more than 300,000 heroin and crack addicts in England who are responsible for nearly half of all burglaries, robberies and shop thefts – while drugs drive nearly half of all homicides, the Home Office said.
This comes with a cost to society of nearly £20bn a year in England alone, it added.
Other plans to discourage people from buying illegal drugs will include police using dealers' seized phones to message their clients to direct them to support and discourage use – a move the government says will help ensure no-one feels anonymous when buying drugs.
There are also plans to pilot a behaviour change campaign on university campuses to understand what messages discourage drug misuse at an early stage.
'Nowhere to hide'
Mr Johnson said drugs were "a scourge on our society", fuelling "violence on our streets which communities across the country are forced to endure".
"That's why, to cut crime and truly level up across the country, we must step up efforts to wipe out the vile county lines gangs who are blighting our neighbourhoods, exploiting children and ruining lives," he said.
Mr Johnson said the new strategy would attack supply and break the county lines model which sees criminals "profit from people's misery".
"Those who break the law will have nowhere to hide," he added.
The strategy comes as the House of Commons Speaker promised to raise allegations that drugs were being used in Parliament with the Metropolitan Police, after the Sunday Times found traces of cocaine in lavatory areas.
Mr Malthouse said he would be surprised if there were no drug users among the thousands of people working in Parliament because it was so widespread, but said the police should investigate. "If I saw it and witnessed it, I would report it," he added.
Labour's shadow home secretary Yvette Cooper told BBC Breakfast that over the last 10 years government had cut drug treatment by hundreds of millions of pounds and reduced the numbers of neighbourhood police.
During that time, there had been a big increase in class A drug use and the trade had become "more violent and more exploitative", she said.
"We do really badly need action. The question is whether it's going to live up to the scale of the treatment needed," she said.
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