The Green Party won the four-year, $12 million Nutrition Fund as part of its support agreement with the Labor-led Government.
Schools and early childhood centers will be able to apply for support in promoting fruit for students, water-only environments and healthier food in canteens and lunch orders from the start of the next year.
According to Greens health spokeswoman Sue Kedgley the fund was the first step in "cleaning up" New Zealand's schools.
A lack of national standards, financial pressures and fragmented school catering had caused schools to sell food that gave scant regard to children's health and their ability to learn.
She said, "We hope this is the first step in turning that around."
Some of the staple items that were found in the menu of the school canteens were pies, chips, doughnuts, fizzy drinks and oversize cookies according to the survey conducted by the Greens Party.
Ms Kedgley alleged that such food items contributed to obesity and in certain cases shortened children's ability to concentrate.
However these items being a source of income to schools made it difficult for them to to stop selling them.
Ms Kedgley said the fund was designed to plug that income gap.
She said, "This fund combined with new nutrition guidelines being worked on will require schools over the next few years will only allow schools to sell food and drinks that are healthy."
She noted that New Zealand was lagging behind countries like England and France, where efforts have already been undertaken to improve the quality of food being sold in schools.
Education Minister Steve Maharey stated that the fund could be used also towards better training for teachers on food matters and information for parents. In addition proposals for morning fruit breaks and installation of water filters in classrooms was made.
The funding would be administered through district health boards and Health Eating Health Action groups.