The analogue TV signal will be switched off between 2008-2012
Culture Secretary Tessa Jowell has paved the way for the BBC to pay up to £14m to Channel 4's digital switchover.
Channel 4 gets no direct government subsidy but has a public service remit and gets free access to the airwaves.
Ms Jowell told the Royal Television Society she wanted to see the channel's "important role as key source of public service competition" continue.
Channel 4 chief executive Andy Duncan said he was "delighted" the channel's switchover costs would be met.
Ms Jowell warned Channel 4's performance would be "closely scrutinised", following the Celebrity Big Brother racism row and the controversy over images shown in a Princess Diana documentary.
The BBC's recent licence fee settlement included provision to meet Channel 4's switchover costs to help it meet its public service remit.
It means the BBC will meet Channel 4's capital costs associated with the digital terrestrial transmitter network in the run-up to switchover.
Ms Jowell said: "Despite the profound changes ahead for the television sector in the coming years, I remain convinced that the case for public service broadcasting will endure."
Last week, media watchdog Ofcom said Channel 4 would face financial uncertainties without assistance.
Mr Duncan said: "This is important transitional help that will underpin our public service contribution."
A spokesman for the BBC Trust said: "We welcome the secretary of state's firm belief in the future of public service broadcasting in the digital age and the unique role of the BBC."