The nation's youngsters often complain they cannot afford to get married because of Iran's economic woes and are living with their parents longer than before.
"The love fund is a realisation of the new government's slogan - taking oil money to the tables of the people," state television quoted Vice-President Farhad Rahbar as saying on Tuesday.
Populist President Mahmoud Ahmadinejad swept to election victory in June on a pledge to distribute the oil earnings of the world's fourth-biggest crude producer more fairly.
"The government's share in the $1.3 billion for the Reza Love Fund will be deducted from the oil income of the National Iranian Oil Company," Rahbar said, without elaborating on how the money would be used to help young couples.
Each province would have a board of trustees to determine how much money needy couples should get.
Iran's oil earnings above a budgeted level go into the Oil Stabilisation Fund, which is only meant to be used in emergencies, should oil prices slump.
Iran's Central Bank, the International Monetary Fund and rating agencies have warned against raiding it for other schemes, arguing this could exacerbate inflation, which is about 15%.
The fund bill will be the first piece of legislation submitted to parliament by Ahmadinejad's government.
Parliament is dominated by populist conservatives who have long advocated raiding the oil fund for social projects.