The cash injection was to help New Zealand Football (NZF) capitalise on the All Whites' second-ever trip to the finals, and assist in the promotion of football domestically.
"The Fifa World Cup finals are a massive event," Mr Key said.
"The All Whites' campaign provides a tremendous opportunity to ramp up interest and enthusiasm for football here, while also promoting New Zealand on a huge world stage.
"The Government's funding will also help New Zealand Football identify talented 17- and 18-year-olds and train them in coaching and leadership skills.
"They will then help run a series of football festival days through clubs and schools to promote football to young Kiwis." Mr Key said (NZF) would be able to use some of the funding to hire a temporary media manager to help the team cope with the massive worldwide media interest in the World Cup.
In addition, NZF's website would be revamped to become the All Whites' home page, to publish news on the team's South African campaign.
Mr Key also praised the Wellington Phoenix for their season, which ended in Sydney on Saturday one step short of the A-League grand final.
"I think it is fair to say all New Zealanders would be proud of how far they had got," Mr Key said.
"Their performance has been stellar, particularly their recent home games...they have given us some spectacular moments."
