It says the cash will help meet the challenges of global demand for food and land, water and energy shortages.
Centres for agricultural innovation will get £90m, while £70m will go to projects which “bridge the gap between the lab and the market”.
Areas the government wants to target include genetics, health in crops and livestock, sensors and robotics.
A new leadership council, which includes farmers, scientists, industrialists and government representatives, is also being set up.
The food supply chain, from farming through to catering and retailing, contributes £96bn to the economy and employs 3.8 million people, according to the Department for Business, Innovation and Skills.
It says that currently not enough of Britain’s research is being commercialised, so farmers and food manufacturers are unable to take advantage of gains that new technology might offer.
Of the £160m, £70m will be invested in a “catalyst”, to fund projects all the way from the lab to the market. Ten million pounds of that will be be used to fund the transfer of technology to developing countries.
Universities and Science Minister David Willetts said: “We have a world class science and research community and our institutes and universities are at the forefront of agricultural research.
“To get ahead in the global race, this strategy sets out how we can ensure that we turn our world-beating agricultural science and research into world-beating products and services.”
Areas where the government says it wants to increase investment include genetics, health in crops and livestock, sensors, robotics , precision agriculture, crop and livestock genomics and plant breeding.
Defra minister for science Lord De Mauley said: “We face a global challenge to feed the rapidly increasing population in a way which is affordable and sustainable.
“We are investing in technologies that will enable British farmers to meet these challenges and take advantage of the growing demand in export markets for British food.”