Alder Hey Hospital and the University of Liverpool have been awarded a £2m research grant to investigate adverse drug reactions in children.
The cash is from the National Institute for Health Research and is the first of its kind to be given to paediatrics.
The aim is to develop instruments and guidelines to help doctors identify and treat children who have a bad reaction to medicines.
Alder Hey said the project would make a "huge difference".
Professor Rosalind Smyth, lead investigator of the programme said: "This comprehensive programme of research will greatly improve our understanding of the safety of drugs used to treat children.
Matthew Peak, director of research and clinical governance co-ordinator at Alder Hey said: "There are currently no national guidelines for detecting or preventing adverse drug reactions in children.
"It will make a huge difference to how children who suffer a reaction to medication are treated."