The funding will support a vital water supply agreement between Glandŵr Cymru, us in Wales, and Dŵr Cymru Welsh Water.
The Welsh Government will provide cover for up to £400,000 every year, for the next five years.
We will also contribute up to £100,000 annually, while discussions will continue with other partners to secure further contributions over the long-term.
The move follows a short-term agreement announced in April 2025, which was due to expire in March 2026.
The historic waterway contributes over £30m to the Welsh economy and supports more than 1,000 jobs. The Welsh Government has therefore brought together partners to find a sustainable solution.
The Deputy First Minister said: "The Monmouthshire and Brecon Canal is a treasured part of Wales' heritage and a vital economic asset for our communities, but climate change and increasingly variable weather patterns have intensified the difficulty of maintaining adequate water supplies.
"We will always look to protect Wales' cultural heritage whilst supporting jobs and tourism and we're committed to working with all partners to find sustainable solutions.
“This agreement builds on the £5m we have already committed to refurbish the Manorafon pumping station and creates the space to develop long-term resilience for this precious waterway whilst we continue our important discussions with our stakeholders.”
