Headspace manager Janelle Johnson said the federal grant of $845,000 will be used to help youth with mental health challenges get jobs and stay in them.

"We have two youth vocational specialists who'll be able to support up to 40 young people a year to either enter employment or education, or maintain their positions," Ms Johnson said.

"It is quite an innovative program in that we integrate employment with a clinical mental health service and support, so a young person that does have a mental illness will be supported with their mental illness by our clinical team at headspace.

"We're really excited for the program to start and we'll be starting it in September this year."

The Department of Social Services said Ballarat was selected, with 25 other sites, because of the number of young people (aged 12-25), the youth unemployment rate, and the number of young people with mental health issues.

Ms Johnson said the scheme would create awareness of challenges faced by youths.

"Young people who have a mental illness have quite a number of barriers to entering the workplace or keeping their positions so this support will also help employers to understand and support the young people in work as well," she said.

"It's about tailoring our support to keep young people in jobs."

The funding was important after many had endured tough times, Ms Johnson said.

"We have some of the highest rates of unemployment for young people in Ballarat and our regional district because young people are the first to struggle with any difficulties in a community," she said.

"They're most likely to be in retail or hospitality or those positions that are new-graduate positions.

"It's a really hard job market in Ballarat anyway, but young people that have an added difficulty of trying to manage their mental illness, it just makes it so much harder if you don't really have a great supportive team on your side."

Minister for Families and Social Services Anne Ruston said the program would support those in need.

"Participants in the program will be able to access a variety of supports including targeted education and employment opportunities, job coaching, and on-the-job assistance," she said.

Senator Sarah Henderson praised the program.

"Headspace Ballarat has been experiencing high demand for services, especially during the challenges of the pandemic," Ms Henderson said.

"Mental illness should not be a barrier to pursuing a fulfilling career."

Ms Johnson said headspace's aim was to ensure people could thrive.

"If we can support young people in their education and vocations, whilst continuing to get support for their mental health as well, we know the trajectory is really positive for those young people," she said.

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