The announcement comes as several EU nations are pressuring Libya to take charge of migrant rescues in the Mediterranean, with the bloc debating how to handle the influx of migrants to the continent.
The measure, adopted during a cabinet meeting, "aims to strengthen the operational capacity of the Libyan coastguard" to ensure the "proper management" of the migrant situation in the Mediterranean, a government statement said.
The measure "prioritises the need to fight human trafficking, to protect human life at sea and to curb migratory pressure," the statement added.
The Italian government will also take responsibility for the maintenance of the 12 boats until the end of the year and offer training to the Libyan coastguard and naval authorities.
According to the Italian transport and infrastructure ministry, the total cost of this aid is around €2.5 million.
"We are aware that this is not enough and that we must work to stabilise the situation, strengthen the rule of law and the protection of people's dignity in the territory of the emerging Libyan state," Transport Minister Danilo Toninelli said in the statement.
In recent weeks EU leaders have cracked down on charity migrant rescue boats operating at sea.
Several EU leaders have accused NGO ships of indirectly aiding human traffickers, saying they should let the Libyan coastguard coordinate rescue missions and take the migrants back to Libya.
But NGOs argue the migrants would not be safe in Libya, where they have faced abuse and rape in holding centres.
According to figures from the International Organization for Migration, more than 1,000 people have died in the Mediterranean so far this year.
