Oxford services manager Joe Batty said there are about 39 people in the city who have been on the streets for a long period of time.
Of those 39, Mr Batty estimates that out of that total 12 people are sleeping on the streets every night.
The money will help a team of five work with people on an individual basis to help them into accommodation.
And Lesley Dewhurst, chief executive of Oxford Homeless Pathways http://www.oxhop.org.uk has welcomed the investment.
She said: “We are delighted they have got some more money to boost their work with that particular client group.
“This group is much more chaotic and difficult to work with and this will be a great help.”
In the past 18 months the project has helped about 325 people into accommodation.
Mr Batty said: “Some of those people go through the “no second night out” scheme at O’Hanlon House in Luther Street and they will be referred from there.
“But there are a number of people who that’s a really difficult transition for, especially for about a dozen of them.
“It could be for a whole host of reasons, such as mental health issues, substance misuse, depression.
“People could have spent a long time drawing themselves away from the community and it is harder for them to integrate back into housing.
“This is about working with them in a way that will make the transition into accommodation easier.”
The grant is part of a £20m Homelessness Transition Fund which is funded by the Department for Communities and Local Government.
Chief executive of Broadway Howard Sinclair said: “We are delighted to be awarded the grant which will support our own and our partners’ work in Oxford, add to the pathway of services overall and, most importantly, help those people who are most vulnerable on the streets to come in and rebuild their lives in a way which gives them personal ownership and responsibility.”
Chairwoman of the fund’s grants board Sharon Allen said: “We know how damaging spending a night on the streets is to an individual’s wellbeing.
“The grants we have awarded so far have helped thousands of people in communities across England to escape homelessness and move towards independence.
“This funding will continue this good work and ensure that individuals who find themselves without a home can be supported to get their lives back on track.”