More than £22.5m is to be invested to create 401 new jobs and safeguard 205 existing ones on the Clyde.
The Govan yard, where the investment will help secure jobs
The money from BAE Systems and government Regional Selective Assistance will be ploughed into BAE's Govan and Scotstoun yards in Glasgow.
The plans were announced by Enterprise Minister Nicol Stephen.
He said the investment was designed to improve the longer term competitive position of the yards across a range of naval work.
"BAE Systems' Glasgow yards have a tradition of excellence in marine engineering," he said.
"I welcome the company's commitment to the future of the yards and to their workforce.
"I am delighted we can play a part in helping to grow the business here through an RSA offer of £4.1m.
"This will help to create 400 high quality manufacturing jobs and sustain more than 200 existing posts."
BAE Systems has invested £30m in the yard over the last five years. It will now invest more than £18m along with the RSA funds.
Vic Emery, managing director of BAE Systems Naval Ships, said: "The investments that we are making in our facilities on the Clyde, with the financial support of the Scottish Executive, will make us more competitive and better positioned to win future naval contracts, both for the UK and export customers.
"We are proud of our long heritage in shipbuilding on the Clyde and confident for our future."
'Ups and downs'
Mr Emery said the yard had a number of contracts, giving a bright medium-term outlook, but there was more work needed for the longer-term.
He added: "Because of the ups and downs in our business, we need a better planned approach to our future work.
"That needs to come from a joining together of all of the shipyards around the country and also the defence procurement agency of the Ministry of Defence."
BAE Systems Naval Ships has facilities in Scotstoun and Govan and in Filton, near Bristol. The company employs about 3,000 people and had a turnover of approximately £350m in 2004.