Experts will look at the best way of using the anti-malarial drug Lapdap.
They will examine if Lapdap (chloroproguanil/dapsone) will be easy and practical to administer, if resistance to the drug develops and whether there are any adverse reactions to it.
Countries will also be given the information they need to decide which anti-malarial drug would be best for them.
It is crucial to develop new anti-malarials for use in sub-Saharan Africa because of the growth in strains of the disease which are resistant to existing drugs.
The area is hardest hit by cases and deaths from malaria.
'Stopgap'
The money has been allocated by the Gates Malaria Partnership, based at the London School of Hygiene and Tropical Medicine, which was established with $40m from the Bill & Melinda Gates Foundation in 2000.
The Tropical Disease Research (TDR) programme and the World Health Organisation will coordinate the research into the drug.
Dr Tom Kanyock, manager of product development for TDR, told BBC News Online: "It appears that Lapdap would offer a safe and effective low -cost alternative to the drugs currently available.
"Both drugs which make up Lapdap have been around for a long time, and used for other things.
"But it was found in the early 80s that, when combined, they made an effective anti-malarial medication."
Lapdap can be made cheaply because the drugs are no longer under patent.
But Dr Kanyock said it was hoped Lapdap would be a "stopgap" until a new generation of anti-malarials currently being researched, can be produced.