The Ministry said it was working with Rotorua providers, iwi, agencies and the Rotorua Lakes Council to set up Housing First as soon as possible "for people who have been homeless a long time and face multiple and complex issues".
"It provides both permanent housing and on-going support".
In May, the Government announced Rotorua was one of four areas to gain a share of $42.9 million to fund 550 new places in the Housing First programme.
"Right now MSD and Rotorua providers are working on a proposal to deliver the service...This will determine the need and number of Housing First places."
Mayor Steve Chadwick said: "We look forward to a [Housing First] provider being announced and council will do whatever we can to support this work".
"In the meantime, we continue to focus on getting everyone through this winter."
She said she was pleased to hear about the new outreach service.
"MSD says there is no need for anyone to be sleeping rough or in cars because there are options they can provide and that's very reassuring."
A Rotorua Lakes Council statement said it would keep working with groups already providing support for the homeless and with others able to provide short-term help.
It said church groups in Rotorua, some of which already helped families in need of emergency housing, had also offered to provide support.
The council also said it was continuing to implement its homelessness action plan, including the provision of access to ablution facilities.
"The solution isn't simple," councillor Merepeka Raukawa-Tait said.
"It is our hope MSD's outreach service will alleviate some of the pressure but council will also keep talking to others in our community who may be able to assist."
To get help with housing:
Contact MSD on 0800 559 009 or visit Work and Income.