He said the funds would go to towards the restoration of essential services, food and water, and shelter.
"In Vanuatu many lives have been lost and communities devastated by Cyclone Pam as it swept through the region and we must help those who are in dire need," he said.
"The government of Papua New Guinea is committed to helping people in our region to recover from this devastation.
"Funding will be provided to Vanuatu and to Tuvalu governments because as they know what they need at a local level and can arrange to have this delivered."
Additional PNG support would come in the form of an assessment team which will evaluate the on-the-ground situation and determine what further assistance could be provided.
O'Neill also said the extreme weather highlighted the vulnerabilities and challenges faced by Pacific Island nations.
"A Papua New Guinea assessment team will soon depart to work with people in affected areas to assess further requirements that can be provided," he said.
"The assessment team will be comprised of officials from departments of Foreign Affairs and Health, the PNG Defence Force, Police and the National Disaster Management Office.
"Several other Pacific Island nations have also been affected by Cyclone Pam, including Kiribati, and Solomon Islands, and Papua New Guinea is reaching out to these governments to better understand their relief and recovery needs.
"We will work with Vanuatu, Tuvalu and other nations around the Pacific in restore cyclone-damaged areas, and to strengthen our defences as we continue to be impacted by extreme weather."