A £14.4million investment will help the elderly, vulnerable and disabled avoid hospital stays and be cared for at home.
The better care partnership agreement will reduce hospital admissions, develop more robust and sustainable community, health and social care servcies and promote independent living.
Milton Keynes Council will fork out almost £1million towards the funding, while the MK CCG gives £9.5million and NHS England delivers the remaining £4million.
Cllr Nigel Long, cabinet member for health and wellbeing, said: “At a time when Council budgets are under massive pressure both from government cuts and from growing demand linked to an ageing population the measures in the partnership agreement lay the ground to make the money go further and avoid high cost spending on hospital beds.
“It is great that the Council and the NHS are working closer together then ever before. I am proud of the Councils leadership in this area.”