The cash injection will come in stages, beginning with €500 million in January next year that will go towards improving teacher conditions and increasing their salaries.
The other €500 million will come at the start of 2019.
Graduate teachers can look forward to an extra €120 a month, while those with more than eight years experience can expect an additional €900 per month.
France's Education Minister Najat Vallaud-Belkacem said that the goal was to "upgrade the entire career to give teachers better pay and to make the profession more attractive".
Under the new changes, a teacher in France will pocket an extra €23,000 by the end of their career, Le Monde newspaper reported.
The government also said that they would clear up some vagaries in the scale of teaching seniority, introducing a new "senior" rank for the most experienced teachers in France, who will be paid accordingly.
The minister of education said that the goal was to "bring France above the OECD average when it came to teacher salaries".
The announcement comes as France's presidential election looms with many suggesting Hollande was getting cheque book out just in time to win over voters.
Teachers were among the main support base for President François Hollande when he was elected to power in 2012. However since then relations have turned frosty.
Primary teachers staged strikes for changes to to the school week while those in middle schools (colleges) rose up against the government's reform of the curriculum.
Hollande is hoping to win them all back over to boost his chances of being re-elected in 2017. The president, who has said he will wait until the end of the year before announcing if he will run, needs all the support he can get.
The first cash injection for teachers scheduled for January 1st, just four months before the election.