The plan will involve up to 40 schools, and will focus on raising the quality of teaching through sharing expertise with successful schools.
First Minister Carwyn Jones said: "If we’re to raise standards and performance in education in Wales across the board we need to boost attainment levels of schools which are underperforming and we know could do better. The significant funding we’ve announced today is going to make a huge difference to those schools chosen to take on Schools Challenge Cymru."
Nearly two thirds of Initial Teacher Training providers believe that teachers are not currently prepared to meet the government’s ambition to raise the complexity threshold for SEND pupils entering mainstream schools.
England’s councils are warning of a "ticking time bomb" in the special educational needs and disabilities (SEND) system, with new data showing deficits that could bankrupt local authorities within three years.
The regulations have been set following a second consultation and detailed collaborative working with organisations and people across deaf and hearing communities.
The Education Committee has published a letter to the Secretary of State for Education asking for more detail about the Department for Education’s work on developing its SEND reforms.