The aid, which is the part of a $7.5-billion five-year development package passed by the US Congress last year, aims at improving the US image in Pakistan, a key ally in the fight against terrorism.
"I know that there is a perception held by too many Pakistanis that American commitment to them begins and ends with security," Clinton said in her opening statement at the second US-Pakistan Strategic Dialogue in Islamabad.
"That this misperception has persisted for so long tells us that we have not done a good enough job of connecting our partnership with concrete improvements in the lives of Pakistanis," Clinton said. "We are working hard to change that."
Clinton is on a two-day visit in Islamabad and was scheduled to leave for Kabul late Monday to attend an international conference on Afghanistan.
The bulk of the aid announced Monday - around $270 million - is allocated for dam irrigation projects in rural areas and improving water storage in two cities, including Peshawar, the capital of militancy-hit north-western province of Khyber-Pakhtunkhwa.
Clinton said that $60 million will be used to improve energy resources in Pakistan, including the completion of two hydroelectric dam projects and development of alternate energy sources like solar and wind energy.
The United States also plans to strengthen Pakistan's private sector to promote economic growth, which has slowed down recently due to militant attacks that have killed thousands of people over the last three years, political instability and an energy crisis.
A $50-million fund is to be be invested in Pakistani companies to help with technological upgrades and $100 million will be provided to expand credit for small and medium-sized businesses.
What is important in Pakistan is "human security", said Clinton, "the security based on day-to-day essentials like jobs, schools, food, water, fuel, equal access to justice - these are building blocks of a durable, thriving society."
"This is a transformational phase in our bilateral relations," said Foreign Minister Shah Mehmood Qureshi. "Together Pakistan and the United States are working to transform long standing cooperative relationship into a strong, comprehensive and sustainable partnership for mutual benefit."
These development projects help Pakistan's ailing economy but do not erode existing differences between Islamabad and Washington.
During her meetings with President Asif Ali Zardari and Prime Minister Yousf Raza Gilani Sunday, Clinton pressed for more action against Taliban militants in its mountainous tribal region along the Afghan border, officials privy to the meetings said.
Also Sunday, Pakistan and Afghanistan signed a landmark trade agreement, the first 50 years, which aims at easing restrictions on cross-border transportation and enhances economic cooperation.