The 2.86 billion won will cover transport, hotel, food and other cost for 229 cheerleaders, a taekwondo demonstration team, and around 140 art performers, the Unification Ministry said in a statement.
The bill for 22 North Korean athletes attending the Games will be paid separately by the International Olympic Committee, officials said.
Seoul has been careful to try to ensure that the North Koreans' visit does not lead to a breach of the many different sanctions imposed on Pyongyang over its nuclear and ballistic missile programmes, and the money is expected to be paid directly to service providers, rather than Northern officials.
Unification Minister Cho Myoung-gyon, who chairs the ministry's South and North Exchange and Cooperation Promotion Council that provided the funds, said the North's presence in Pyeongchang was generating "key momentum for improving inter-Korean relations and securing peace on the Korean peninsula".
He acknowledged concerns over the nuclear-armed North's participation in the South's Games.
"We are keeping well in mind IOC regulations, international norms and sanctions against the North," Cho added, according to Yonhap news agency.
North Korean leader Kim Jong Un has praised the welcome the South gave the North's high-level delegation last week, which included his sister Kim Yo Jong.
Yo Jong delivered Kim's invitation for the South's President Moon Jae-in to come to a summit in Pyongyang.
Moon did not immediately accept, saying the "right conditions" were needed.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)