First Minister Nicola Sturgeon made the announcement in an address to the Circular Economy Hotspot event in Glasgow on Wednesday.
Businesses in the circular economy aim to reduce waste and invest in keeping materials in circulation for as long as possible.
Three businesses - Total Homes and Revive Eco, located in Glasgow, and Angus 3D, based in Tayside - will receive funding.
Total Homes deliver house clearances for Housing Associations in Glasgow and ensure household appliances, furniture and other goods are re-used.
They will be given £312,385 worth of funding.
Revive Eco, which collects used coffee grounds and recycles them to create high value bio-oils, will receive £234,358.
Angus 3D, which aims to bring the latest metal 3D printing technology to Scotland, will be given a total of £175,000.
Scotland has four circular economy regions: Circular Glasgow, Circular Edinburgh, Circular Tayside and Circular North East - with each working on projects tailored to local opportunities.
Analysis suggests that a circular approach by businesses could be worth a potential £1 billion to the north-east and Tayside economies.
Reports were produced with the assistance of the local chambers of commerce to evaluate the impact it could have in each area of Scotland.
The First Minister said: “Moving to a circular economy -and this I think is true of many issues relating to the environment and climate change - is, first and foremost, an overwhelming moral imperative. However as these reports very powerfully demonstrate it is also a massive economic opportunity.
“And it also, in my view, speaks to Scotland’s history, to our sense of our identity.”
Iain Gulland, the chief executive of Zero Waste Scotland, said: “It’s fantastic to be able to profile the work that’s being done in Scotland to kickstart the circular economy to a global audience.
“Businesses like Revive Eco, Angus 3D and Total Homes are already doing great things, and I hope this event will be an impetus for even more ambition”.
Glasgow City Council leader Susan Aitken welcomed the investment and highlighted her ambition for Glasgow to become Scotland’s first circular city.
She said: “The opportunity for Scotland in embracing the circular economy runs into the billions of pounds. I want Glasgow to be at the forefront of seizing that opportunity.
“The work done by the Chamber of Commerce and Zero Waste Scotland in Circular Glasgow has already put us far ahead of most of our competitors but the opportunities really are limitless.
“Our Route Map will point a way to building better homes and communities, reducing food insecurity and playing our part in dealing with the world’s addiction to single use plastic.
“Increasing the number of homes powered by renewable or circular energy to 15% by 2030 is an ambitious target but we will need to be ambitious in the coming years.”