There are around 250,000 lambs that should already been slaughtered and shipped to European markets but now face starvation from the onset of winter and lack of grazing.
The initiative follows warning from farming leaders of an imminent animal welfare crisis, with export markets closed for the past two months and only due to reopen, subject to conditions, this Friday.
Charles Milne, Chief Veterinary Officer for Scotland, said: "It is clear that a real welfare problem is emerging. This scheme is essential to prevent a catastrophe of animal suffering on a large scale.
"All animals entering the scheme would have been slaughtered and their meat exported. However, with the lack of availability of this market we must ensure that welfare of these animals is not compromised."
Under the scheme- which is entirely voluntary- the light lambs will be sent to abattoirs for humane slaughter and the farmers will receive £15 per animal. The carcasses will not enter the food chain but some will be rendered for use in biodeisel and the remainder will be incinerated.
The scheme is aimed at lambs weighing less than 25kg and will operate for a maximum of 10 weeks. Producers will be required to transport their lambs to 18 collection centres situated across Scotland, where they will be paid £15 a head. The collection centres will then transport the lambs to abattoirs.
The cost of the scheme is estimated at £5m to £6m and the Scottish Government will be seeking reimbursement from Defra.
Rural Affairs Secretary Richard Lochhead said: "The foot and mouth crisis has left hundreds of thousands of sheep stranded on our hills facing starvation and it is quite clear that we have to act now to prevent any more suffering. We are already getting isolated reports of lambs dying.
"We cannot countenance the prospect of this continuing given the impact not only on the welfare of the animals but also on those farmers who would otherwise face watching their flocks starve to death.
"Scotland is facing this problem earlier than other parts of the UK because our grazing cycle is one month ahead.
"The Scottish Government strongly believes the moral and financial responsibility for this crisis lies with the UK Government.
"It should bear the costs of this scheme but action is needed now and we will provide funding on an emergency interim basis and seek to recover this from Defra in due course."