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."
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