The news came after negotiations with the German Treasury, the Claims Conference, and leaders from the Center of Organizations of Holocaust Survivors in Israel (COHSI).
The payouts will support survivors aged 85 and younger, with birth dates between January 1928 and May 1945. Approximately 80,000 such individuals currently reside in Israel.
"This definitely represents significant progress," said COHSI Chairwoman Colette Avital. "After much effort, this is the first time that the German government is acknowledging the justice of the claim and announcing that it will consider ways to compromise with those children who suffered in the Holocaust, and who were the hardest hit."
She added, "I hope that the German government will make historical justice on the matter, and will act to develop a rapid and adequate system of compensation so that those people, who today are already grandmothers and grandfathers, can get what they deserve in their lifetimes."
The restitution is meant as recognition for the stolen innocence and lost childhood for youths that lived under Nazi rule. Qualifying applicants will be those who lived in nations under the Nazi government and its allies.
"The Germans must consider the ways to compensate them for their orphanhood after their parents were murdered in the Holocaust, compensation for psycho-sociological damage and personal injury that oftentimes had long-term effects," COHSI added in a statement.