In Mental Health Week, the Federal and Tasmanian governments are moving to break the cycle of homelessness for people with mental health issues with a new $6.6 million project.

Federal Minister for Mental Health Mark Butler said that around 280 people will receive individualised support over the next four years.  

"Our agreement with Tasmania will ensure we respond better to the needs of people with severe and debilitating mental illness so they stay well, have a place to live and lead functional lives," Mr Butler said.

"People supported under this new program will get flexible support to access and maintain accomodation, which can be one of the biggest challenges for people with mental illness."

Tasmanian Minister for Health Michelle O'Byrne said this project would mean a great deal to people with severe mental illness in Tasmania who came into contact with multiple service systems.

"One of the problems confronted by people with severe and persistent mental illness is how disjointed services can be, so this project aims to provide more individualised and coordinated services," Ms O'Byrne said.

"The funding will help address service gaps and assist more Australians living with mental illness to secure and maintain stable accommodation and support that they need to stay well."

"The project will also assist in developing the capacity of the Tasmanian community sector which plays a significant role in the delivery of mental health services throughout the state."

Tasmania's Minister for Human Services, Cassy O'Connor, welcomed the funding package.

"The needs of homeless Tasmanians are often complex, and can involve mental health issues. This package will go a considerable way to ensuring people battling to find and sustain affordable housing get the assistance they need," she said.

"This is another fantastic example of State and Federal Governments working together with service providers to support vulnerable and disadvantaged Tasmanians."

The funding is part of the $200 million National Partnership Agreement on Mental Health which is providing more services and support for people with a mental illness who frequently present at emergency departments, or who are at risk cycling in and out of institutional settings.