The German airline, which owns low-cost Germanwings, said the money would cover “all costs arising in connection with the case”.
Meanwhile, French President Francois Hollande said the 150 victims would be identified by the end of the week.
An access road to the crash site has been completed to help speed up the recovery of bodies.
However, rescuers have warned the operation could still take several months.
Speaking at a joint news conference with German Chancellor Angela Merkel in Berlin, President Francois Hollande praised the work of scientists at the scene in the French Alps.
“The French interior minister confirmed that by the end of the week at the latest it will be possible to identify all of the victims thanks to DNA samples,” he added.
None of the victims were found intact after the plane’s 430mph impact, but different strands of DNA have been identified at the site.
Germany says that the $300 million being put aside by Lufthansa is separate from the $54,250 (€50,000) available to the relatives of each passenger to cover short-term expenses.
Airlines are obliged to compensate relatives for proven damages of up to a limit of about $157,000 (€135,000) – regardless of what caused the crash – but higher compensation is possible if an airline is held liable.
On March 30 it emerged that co-pilot Andreas Lubitz, had at one point received treatment for suicidal tendencies before getting his pilot license.
Andreas Lubitz, 27, is suspected of deliberately crashing the plane in the Alps, killing all 150 people on board.
Officials in Duesseldorf said the investigation so far had revealed no clue as to his motives.
German prosecutors say he underwent psychotherapy before getting his pilot’s license and that medical records from that period referred to “suicidal tendencies.”
Lufthansa says that Andreas Lubitz’s medical records were subject to doctor-patient confidentiality and it had no knowledge of their contents.
Lufthansa also announced on March 31 that it had cancelled plans to celebrate its 60th anniversary on April 15.
On April 17, the airline will broadcast live coverage of a state memorial service at Cologne Cathedral.
Germanwings flight 4U 9525 crashed near the French Alpine village of Le Vernet on March 24, flying from Barcelona to Duesseldorf.
The cockpit voice recorder suggested Andreas Lubitz crashed the plane deliberately after locking pilot Patrick Sondenheimer out of the cockpit.
The data recorder, which tracks the plane’s altitude, speed and direction, has not yet been found.
Lufthansa board chairman Kay Kratky on March 30 warned it may have been too badly damaged and may not be sending signals.
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