Governor Pat Quinn and Mayor Rahm Emanuel were joined by Lisa Jackson from the EPA to make the announcement.
The money will go toward new facilities to disinfect water that is released into the river.
There have long been calls to improve the water quality.
Under a settlement reached last year the metropolitan water reclamation district agreed to clean the river.
"It is the part that connects the city," Emanuel said. "Making it more part of a recreational frontier where families can enjoy it is an essential goal."
Construction is scheduled to begin this fall.
The entire project should be completed by December 2015.