The Newcastle-based bank has pledged £4m over four years with the government committing the same amount.
The application process is now open for grants of £10,000 to £50,000.
Virgin Money previously gave £1.5m to the Northern Rock Foundation following its acquisition of the bank but that fund is likely to close.
There will be two rounds of grants over the next nine months, with the first awards for projects in the North East expected to be made in November.
The foundation said it aims to "promote the sustainable regeneration of economically and socially deprived communities" and an independent board of trustees has been appointed.
Chief executive officer Jayne-Anne Gadhia said: "Virgin Money takes its social responsibilities very seriously in all of the communities in which we operate, but particularly in the North East of England, given our acquisition of Northern Rock.
"The foundation can make a positive and sustainable difference, initially in the North East and over time across the whole of the UK."
The Northern Rock Foundation was created in 1997 after the now defunct Northern Rock Building Society was demutualised. A percentage of Northern Rock's profits were used to support charities with more than £200m being handed out.
Virgin Money then took over as its main backer but it was decided last year to close the scheme after future funding could not be agreed.
A total of £8m will be distributed to community projects in the North East and further afield after Virgin Money launched a new charitable foundation.