The money will be spent on setting up the Glasgow-Caribbean Centre for Development Research which will strengthen academic links between Scotland and the West Indies.
The centre, which will have bases in both the West Indies and Glasgow, will support further study into slavery and other subjects to the benefit of those countries affected by the trade.
It comes after a report last year found that, while Glasgow University university played a part in the abolitionist movement, it also received significant financial support from people whose wealth derived, in part, from slavery.
The university then committed to a programme of 'reparative justice' with it now announced it will fund the centre for the next 20 years.
Professor Sir Hilary Beckles, vice chancellor of University of West Indies, told a gathering in Kingston on Wednesday night that, while most institutions looking into their links with slavery 'do research and run', Glasgow 'researched and repaired'.
He said he was "proud of the decision of the University of Glasgow to take this bold, moral, historic step in recognising the slavery aspect of its past and to rise as an advocate of reparatory justice, and an example of 21st century university enlightenment.”
Glasgow University received thousands of donations during the 18th and 19th Centuries. Researchers found that some payments, including sums for bursaries and endowments, were linked to slave trade profits. At today's value, they are estimated to be worth between £16.7m and £198m.
Professor Beckles signed a Memorandum of Understanding (MOU) along with Dr David Duncan, Chief Operating Officer and University Secretary to reinforce the working partnership between the two institutions.
It was pledged the new centre will host events and activities, sponsor research work, coordinate academic collaborations with other universities, including The UWI, and help to raise public awareness about the history of slavery and its impact around the world.
Dr Duncan said: “This is a historic occasion for both the University of Glasgow and The University of the West Indies.
"When we commissioned our year-long study into the links the University of Glasgow had with historical slavery we were conscious both of the proud part that Glasgow played in the abolitionist movement, and an awareness that we would have benefited, albeit indirectly from that appalling and heinous trade.
“From the very first we determined to be open, honest and transparent with the findings, and to produce a programme of reparative justice. In this we were greatly assisted by Professor Sir Hilary Beckles, Vice-Chancellor of the University of the West Indies who was one of our external advisors.
"I am delighted that as a result of the report we are now able to sign a Memorandum of Understanding between the University of Glasgow and The UWI and I look forward to the many collaborative ventures that we will jointly undertake in future.”