Headley Court rehab unit in Leatherhead, Surrey is to be given the funding injection to refurbish wards and improve accommodation.
The news follows the opening of a new £16.9m wing by the Prince of Wales last month.
The Jubilee Rehabilitation Complex includes a therapy building, radiology department and a flat where patients can learn to live independently.
Defence Secretary Philip Hammond made the funding announcement at the Conservative Party Conference in Birmingham on Sunday. The Weybridge and Runnymede MP told delegates at the conference the MoD considered the care of injured army personnel to be of the "highest priority."
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He said: "One of my most humbling experiences in this job was my first visit to Headley Court, seeing the discipline and determination with which servicemen and women face and overcome terrible, life-changing combat injuries.
"We constantly invest in staff, facilities, patient welfare and treatments and this additional £5m will further improve the infrastructure to ensure our injured service personnel get the very best."
Headley Court has been open and treating injured veterans and personnel in the armed forces since World War II.
The recent wars in Iraq and Afghanistan have caused the need for a rapid expansion of operations at Headley Court.
The centre has bed space for almost 100 in-patients and treats those troops who return for rehabilitation.
In June 2010 Prince William opened the Help for Heroes Rehabilitation Complex at Headley Court, which contains a swimming pool and gym complex.
(IT/GK)
