Years of fighting between militants and federal forces in Grozny and other cities across Chechnya have left much of the region in ruins.
"A resolution is already with the Cabinet," Sergei Ivanov said after a meeting with the republic's president and prime minister. "It has been agreed by all the [appropriate] agencies, including the Finance Ministry."
Ivanov, who is also a deputy prime minister, said more than a billion rubles ($37 million) in federal government funds had been earmarked to rebuild the city in 2006.
Ivanov made Grozny the primary destination of his current tour around the North Caucasus region. Explaining the reason behind the decision, he said he "wanted to see with his own eyes and check how the Russian president's instructions concerning Grozny's restoration are being implemented."
"The war is over and the city must be put in order," he said.
The Defense Ministry's engineering arm - Spetsstroi - is now clearing the debris in central Grozny to start the construction of new buildings and infrastructure facilities, Ivanov said.
Chechnya's prime minister, Ramzan Kadyrov, said he was confident the money would start flowing on time.
Speaking a day after the death of Russia's most wanted terrorist, Shamil Basayev, Kadyrov said, "It is pleasing that the Defense Ministry will no longer bomb but rebuild Grozny."
