Ministers say the £168m, split between 148 councils, will help to fix some three million potholes by March 2015.
All councils which applied for money will get a share, but extra has been given to those which "demonstrate best practice in highways maintenance".
But the Local Government Association said the sum was "a drop in the ocean".
Pothole fund: Figures by council
The AA welcomed the funding but said more work on road surfaces was needed.
Transport Secretary Patrick McLoughlin said: "Potholes are the bane of all our lives and the funding announced today is an important step in ridding our roads of this menace.
"But it is only one part of a massive programme of investment to get our country up to speed as part of this government's long-term economic plan."
It costs an estimated £53 to fix every pothole, the Department for Transport said.
BBC transport correspondent Richard Westcott said the money would "bring some relief to drivers", but added: "Councils have been saying for years that they need billions, not millions, to really fix our roads."
Councils in London will receive £10m of the latest funding - enough to fix an estimated 188,000 potholes - while £5.1m will go to North Yorkshire, with Cumbria to get £4.8m.
The money must be used to "repair potholes or to ensure that they do not appear in the first place" and councils must publish monthly updates on how many repairs have been carried out.
A "greater share" is being given to those which have "invested in new technology and initiatives".
These include Northamptonshire - which has "set up systems to track pothole repairs in real time" - and Hampshire - where new pothole fixing equipment can be converted to grit roads in icy weather.
The Department for Transport said the money, first announced in Chancellor George Osborne's Budget in March, was "part of the biggest investment in roads since the 1970s".
It said £24bn would be spent on England's strategic road network - meaning motorways and many A-roads maintained by the Highways Agency - from 2010-21.
Local councils are responsible for other roads, and the government said £7.4bn would be "committed to local roads in the next Parliament", along with money from other funds given to councils.
The latest pothole funding is separate from the £183m allocated to English councils in March to repair roads damaged by the winter's severe weather.
An LGA spokesman said: "While we welcome any extra funding, £168m is a drop in the ocean compared to the £12bn backlog in roads maintenance.
"Moreover, we are disappointed to see the government tie this funding to monthly reports on pothole repairs.
"Fixing potholes is a sticking plaster-approach which does nothing to address the fundamental decay of the underlying road infrastructure.
"What we need is a considered, long-term approach to road maintenance not annual announcements of emergency funding."
AA president Edmund King said: "Potholes in the UK have been a long-running scourge that has cost tens of thousands of car owners millions of pounds in repair bills, and councils millions in compensation claims.
"The new government money is very welcome but it will only be truly effective if roads are re-surfaced on time and not just patched up after each winter."
Details of where money set aside to fix potholes in England will be spent have been released by the government - with extra cash going to "model" councils.