International Development Secretary Andrew Mitchell said the World Food Programme cash would also treat 329,000 malnourished children and mothers.
The African country faces its worst drought for a decade with an estimated 3.2m people in need of emergency aid.
The UN has called for international aid across the Horn of Africa where 10 million people are affected.
Some areas have suffered the worst drought in 60 years and the UN now classifies large areas of Somalia, Ethiopia, Djibouti and Kenya as in a crisis or an emergency.
Mr Mitchell warned that other countries across the world must give money if a full-scale disaster was to be avoided.
“Through no fault of its own, the Horn of Africa is experiencing a severe drought caused by the failed rains,” he said.
“Britain is acting quickly and decisively in Ethiopia to stop this crisis becoming a catastrophe. We will provide vital food to help 1.3 million people through the next three months.
“This situation needs an international response and Britain is calling on the international community to provide fast, effective relief.”
Oxfam welcomed the announcement and said the money could not come soon enough.
Humanitarian director Jane Cocking said: “There are already critical and life-threatening food shortages in Ethiopia and across the Horn of Africa region.
“Two successive poor rains have left millions of people struggling to get food as hundreds of thousands of livestock have died and crops have failed.