Economic secretary Ed Balls said the£340m funding will be spent on improving childcare and support for parents struggling to cope.
The review seeks to make disabled children a priority at a local and national level. A national indicator as part of the PSA set, underpinned by a 'core offer' to help disabled young people and their parents understand what support they can get and how to access it across local services will be developed.
Children's charity NCH said the investment must 'continue and increase'. Chief executive Clare Tickell said:
'It is promising to see that disabled children and their families, who have for too long been struggling without proper support, are finally getting the break they deserve. For them this announcement is long awaited.
'The past few years have seen a massive reduction in funding for families with disabled children, particularly in the area of short breaks, which has led to enormous strain on children and their carers.
'40,000 more short breaks services will make a life changing difference to this group, and although it is certainly good news to finally see disabled children high on the government's agenda, this investment must continue and increase, to give these children and their families the quality of life they deserve.'
Child Poverty Action Group chief executive Kate Green said:
'Disabled children and their families are at particularly high risk of poverty. This new investment will improve the quality of life for thousands of children and their families.
'The next step must be to make sure that all disabled children receive the benefits they are entitled to and that the extra support available is enough to meet the full additional costs faced by the parents of disabled children.'