Scientists say the population of the vaquita marina - Spanish for "little sea cow" - has dwindled to 150 or fewer from more than 500 a decade ago.
Plans include paying fishermen to avoid the porpoise's habitat or give up drag nets that drown dozens of the shy, dolphinlike animals each year. Some will even be paid to stop fishing forever.
"We want to save a species at risk without putting humanity at risk," Environment Secretary Juan Rafael Elvira said at a ceremony kicking off the program.
Some US$13 million of the funds will go directly to families along the upper gulf. Working fishermen will be paid US$4,500 each to stay out of the nature preserve covering most of the vaquita's habitat.
Fishermen at the ceremony said the money would likely fall short of their lost revenues.
"We're participating to help save the species," said Oscar Javier Garcia, who agreed to keep out of the nature preserve if paid. "We're not convinced, but we're participating."
The government will also grant fishermen up to US$35,000 to learn safer techniques, such as catching shrimp with traps too small to ensnare the porpoises. Others will receive as much as US$60,000 for handing over their boats, motors and licenses and quitting the trade completely.
"It's a critical time for the vaquita, and the Mexican government has stepped up to the plate," said Peggy Turk Boyer, executive director of the Intercultural Center for the Study of Desert and Oceans, a U.S.-Mexican institution that will help survey the porpoise population this fall.
Also known as the Gulf of California porpoise, the elusive vaquita was only discovered in 1958. It rarely jumps from the water and avoids boats, making an accurate population count difficult.
The vaquita also is threatened by the dwindling flow of the Colorado River into the gulf. Depleted by western U.S. cities for drinking water, the river carries high levels of agricultural runoff that can significantly alter the gulf's chemistry.