The state government will invest $2.9 million to co-design a redress scheme for people who experienced abuse or neglect while living in Victorian orphanages, children's homes and missions.
The scheme covers the period from 1928 to 1990, when 90,000 children were placed in state care.
It will include urgent hardships payments of up to $10,000 for eligible care leavers.
Premier Daniel Andrews has promised to offer a formal apology to the group next year if Labor is re-elected next month.
Former premier Steve Bracks issued a formal apology to "Forgotten Australians" in 2006, while a national apology recognised institutional sex abuse victims and survivors in 2018 following a royal commission.
"It is overdue. It is the right thing to do," Mr Andrews told reporters at Victorian parliament on Wednesday.
Mr Andrews said the government was unwilling to wait any longer for a national scheme to cover care leavers.
"We had hoped that might happen," he said.
"It's clear to me now that I don't think that will, or if it did it's still some way off. So we're better to do this ourselves and get it done."
The scheme could cover deceased care victims similar to others being created for forced adoptees and firefighters who went through the Fiskville CFA Training College.
Mr Andrews said details would be worked out in the co-design process.
The government aims to finalise the scheme's design by the end of 2023.
The estimated cost to taxpayers won't be known until the scheme's design is settled.
Church groups, charities and others involved in the system before it shut down in 1990 will be asked to provide records and make a financial contribution to the scheme.
"All of us do need to do whatever we can to support that sense of healing, at the very least a sense of recognition and respect," Mr Andrews said.
The Andrews government has not spoken to the opposition about the redress scheme or apology but expects both will garner its support.
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