The disease had been identified as a priority by the Wales Animal Health and Welfare Framework Group.
Further details will be announced in the coming months following ongoing discussions with industry representatives.
The Minister said: "Sheep scab has significant economic consequences for sheep producers and animal welfare issues for sheep. It is one of the most contagious disease of sheep in Wales and eradicating it is a priority for us and the industry.
"I’m pleased to be able to announce £5m Rural Development Programme funding will be used to help support the industry tackle the disease. Eradicating the disease has the potential to deliver significant lasting economic benefits for the sector at a particularly challenging time as we prepare to leave the European Union."
Welsh Environment Minister, John Griffiths, has announced changes to some bovine TB cattle and surveillance controls to provide a higher level of protection against the disease.
The Minister confirmed that from 1 April 2013, some existing Pre Movement Testing exemptions will be amended. The main changes concern movements from markets and common land.
New key measures are:
The Minister announced that a new dedicated TB epidemiologist was to be appointed for Wales and that he or she would work within the AHVLA and focus on specific areas or clusters of disease. The postholder will be in place by April 2013.
He also announced new advice and support to farms dealing with breakdowns: "I have also asked officials to develop a way to provide additional advice and support to farmers to clear up breakdowns more quickly and efficiently. We have started to explore how private vets could become more involved with this new initiative called the Integrated Breakdown Management Project.
"I know that bovine TB is a devastating disease that has a big impact in rural communities. Since I launched the Strategic Framework for Bovine TB Eradication last March, we have kept the programme under constant review. With the new tools I have outlined today, we are addressing TB in livestock and wildlife and maintaining an effective eradication programme for the benefit of farmers, rural communities and the economy in general."