The decision is a break with the hardline policy on aid pursued by Seoul since the start of a year ago.
Whether or not to offer aid to Pyongyang is an issue sparking political repercussions in a country in which conservatives and liberals are sharply divided on how to deal with North Korea.
The decision was made at the 286th Inter-Korean Exchanges and Cooperation Promotion Council, with unification minister Cho Myong-gyon in attendance.
The aid will be distributed via United Nations agencies.
"We hope this aid will help improve humanitarian situation among those in need in North Korea by vaccinating children and treating them for malnutrition and improving the nutrition of pregnant women", the ministry said. Japan's government spokesman, Yoshihide Suga, said it could undermine worldwide efforts to put pressure on North Korea.
Seoul will also provide USD$3.5 million for aid projects run by the United Nations Children's Fund (UNICEF), which will provide health and medical treatment for children and pregnant women, as well as treatments for malnutrition.
Karin Hulshof, regional director for East Asia and the Pacific at UNICEF, highlighted the urgency of helping North Korean children, saying that the challenges they are facing are "all too real".
The Japanese prime minister, Shinzo Abe, reportedly asked the South Korean president, Moon Jae-in, to reconsider the timing of the aid package in a recent telephone call. Seoul's approval of humanitarian aid to North Korea may have complicated the meeting even more.
The timing of the assistance, however, has not been set as the government plans to take into account current inter-Korean relations.
South Korea has put massive state-backed assistance to North Korea on hold following its 2010 sanctions created to punish the North for the sinking of a South Korean warship.
"Our new executive order will cut off sources of revenue that fund North Korea's efforts to develop the deadliest weapons known to humankind", he told reporters ahead of a luncheon meeting with the leaders of Japan and South Korea.
Moon's conservative predecessor Park Geun-hye halted humanitarian aid to North Korea after the regime conducted a nuclear test in January 2016.
Instead, the government had permitted civic groups to provide aid to the North and helped North Koreans indirectly via global organizations.