Joe Biden will use $7bn frozen in Afghan reserves to pay for humanitarian projects and a trust fund for 9/11 victims.
The US president signed an executive order to split the money between the two on Friday.
The democratic Afghan government was forced from power last year, leaving $7bn in the US Federal Reserve bank.
Half will go towards those impacted by terrorists acts who have taken claims to court for compensation. Courts will decide if victims will receive any of the $3.5bn set aside.
As elected officials fled Afghanistan, the bank froze the assets to stop anyone accessing it.
The Taliban made claim to the money but counter-terrorism sanctions stopped it from being released to the new Afghan regime, which the US does not recognise.
The White House said in a statement that the order “is designed to provide a path for the funds to reach the people of Afghanistan, while keeping them out of the hands of the Taliban and malicious actors.”
Since the withdrawal of western troops, the Afghan economy has crashed, as it has lost much of its budget, nearly 80% of which was funded by the international community.
The loss of money has left a desperate situation behind due to a lack of funding for hospitals, schools and factories.
Afghanistan is now suffering from increased poverty and malnutrition within its population.
Taliban political spokesman Mohammad Naeem criticised the Biden administration for not releasing all the funds to Afghanistan.“Stealing the blocked funds of Afghan nation by the United States of America and its seizure (of those funds) shows the lowest level of humanity . . . of a country and a nation,” Naeem tweeted.