Mental health nurses are to be based in police stations and courts in London and nine other areas across England as part of a pilot scheme to cut reoffending.
The Department of Health (DH) announced today that it would provide £25 million over the next 12 months to pilot the scheme to help people with mental illness, at the earliest possible stage.
Health Minister Norman Lamb said: "Too often people with mental health illnesses who come into contact with the criminal justice system are only diagnosed when they reach prison.
"We want to help them get the right support and treatment as early as possible. Diverting the individual away from offending and helping to reduce the risk of more victims suffering due to further offences benefits everyone."
It is estimated that police officers spend 15 to 25 per cent of their time dealing with suspects with mental health problems.
The pilot mental health "liaison and diversion" teams will help officers to respond to calls and identify those with problems.
According to the Department of Health, a large number of people in prison are diagnosed with a mental health problem, a substance misuse problem or a learning disability, and a quarter of prisoners have a severe mental health illness.
The one-year scheme will be rolled out in London, Merseyside, Avon and Wiltshire, Leicester, Sussex, Dorset, Sunderland and Middlesbrough, Coventry, South Essex, and Wakefield.
Rethink Mental Illness chief executive Paul Jenkins welcomes the news.
He said: "We welcome the roll out of a network of mental health liaison and diversion teams to work in police stations and courts to better respond to the needs of vulnerable offenders.
"At present lots of people fall down the gap that exists between health and justice systems.
"No one benefits from this, least of all the taxpayers - when a failure to address underlying problems leads to the avoidable use of expensive custodial sentences.
"There’s also no robust way to identify vulnerable people, including those who are already known to services, and little support is available to overstretched staff in custody suites."