It involves assisting the delivery of Universal Credit, Child Maintenance and Personal Independence Payment services.
Another 100 workers will be redeployed from offices with surplus staff.
The Department of Communities already employs approximately 1,400 staff who provide services to claimants in Great Britain on behalf of DWP.
The 170 new posts will be offered, in the first instance, to people who have been successful in previous civil service recruitment processes.
The jobs will be shared between sites in Belfast and Armagh and will need to be in place by April 2017.
Communities Minister Paul Givan said: "This additional investment is clear acknowledgement by DWP that they value the high quality services currently being provided by our staff."
The Department of Communities is to recruit 170 staff to work on a contract it has been awarded by the UK's Department for Work and Pensions (DWP).