The Environmental Protection Agency said the 2012 funding was aimed at reduction the pollution associated with diesel engines.
Gina McCarthy, assistant administrator for the EPA's office of air and radiation, explained that technology has evolved to the point that diesel engines can run cleaner.
"These grants enable owners of older diesel vehicles to make investments that modernize their vehicles while making the air in their communities cleaner and healthier to breathe," she said in a statement.
The EPA described diesel engines as "fuel-efficient workhorses," though older engines emit larger amounts of nitrogen oxides and particulate matter, which are related to serious health complications.
The grant program is part of the EPA's Diesel Emission Reduction Program aimed at cost-effective clean diesel technology.
The EPA said that for every $1 spent to fund clean diesel, as much as $13 is saved in public health expenses.