Pocket parks were first created in New York in the 1960s as people increasingly looked for green spaces among the towering skyscrapers. The most famous example is the award-winning Paley Park in Manhattan, which includes a 20-foot high waterfall and an overhead canopy formed by locust trees.
Proposals could include creating wildlife habitats, transforming run-down gardens or simply creating green oases in bustling neighbourhoods.
Communities secretary Greg Clark said: "Parks and green spaces give us all a chance to relax and unwind from the rigours of modern life. They breathe life into our bustling towns and cities, and provide valuable space for communities to socialise, take part in exercise and children to play."
The funding will help transform "scores of unloved spaces" across the country, providing communities with parks that will be enjoyed for years to come, he said.
Communities minister Marcus Jones said: "Parks are the gateway to the great outdoors and can provide a real boost to people's wellbeing. They are particularly important in town centres where many don't have their own gardens.
"That's why with this new funding we are regenerating underused spaces and helping to make sure everyone has access to the green space they deserve.
The programme will build on the success of a similar scheme in London, which has seen a number of pocket parks created across the capital, including St Luke's Wildlife Garden in Hackney and the Dinosaur Play Park in Haringey.
The Monitor of Engagement with the Natural Environment survey provides trend data for how people use the natural environment in England. It shows that parks in towns and cities were the most frequently visited destinations, accounting for an estimated 778 million visits in 2013 to 2014.
Graham Duxbury, chief executive of Groundwork, said: "We welcome the fact that the government is helping more people improve green spaces on their doorstep. We know how valuable local projects like this can be in changing the way people feel about where they live. They can also help communities develop the confidence and skills they need to make bigger changes to their neighbourhood."
Drew Bennellick, head of landscape and natural heritage at the Heritage Lottery Fund, said: "As a nation we pride ourselves in the quality of our parks and green spaces. From our Victorian forebears we have inherited a history of creating wonderful green places vital for our health, wellbeing, culture and nature.
"This exciting new investment from DCLG offers an opportunity to inspire local people to continue the tradition whilst leaving an even greater legacy of quality green spaces for future generations to enjoy."