Three teams will each pursue separate projects, each aiming to provide "stepping stones" towards enabling crops to fix their own nitrogen.
The largest share of the funding will aim to genetically alter a nitrogen-fixing bacterium and a simple grass species in order to maximise the amount of nitrogen delivered to the plant.
The bacterium will be genetically "tuned" to respond to the plant's signals and nutritional needs to control nitrogen production, before the technique is adapted to commerical crops. The University of Oxford and the John Innes Centre will provide the UK expertise.
The second aims to design and build a "synthetic biological module" capable of fixing nitrogen inside plants' cells, by adapting a process employed naturally by cyanobacteria, with the University of Edinburgh and Imperial College London among the partners.
A third will attempt to rediscover a "lost" bacterium, first found in a German charcoal pit in the 1990s, that could also enable plants to fix their own nitrogen.
Michigan State University assistant professor Maren Friesen, who will work with researchers at ICL on the project, said: "It contains an unusual system for fixing nitrogen in the presence of oxygen, which could be a missing piece in the puzzle for creating nitrogen-fixing plants."
The world is forecast to need 190 million tonnes of nitrogen fertiliser by 2015.
Professor Douglas Kell, chief executive of co-funder the Biotechnology and Biological Sciences Research Council (BBSRC), said: "By bringing together world-leading researchers from the US and UK, we are rethinking current farming practices.
"Thanks to this exciting research, farms of the future could one day produce crops that do not rely on costly and polluting man-made fertilisers."
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