The Weybridge and Runnymede MP said the extra cash would be used to refurbish wards and improve accommodation at Headley Court near Leatherhead. The minister announced the funds at the Conservative Party Conference in Birmingham on Sunday.
A new £16.9m wing was opened by the Prince of Wales last month. The Jubilee Rehabilitation Complex includes a therapy building, radiology department and a flat where patients can learn to live independently.
Mr Hammond told party delegates: "One of my most humbling experiences in this job was my first visit to Headley Court, seeing the discipline and determination with which servicemen and women face and overcome terrible, life-changing combat injuries."
He said the Ministry of Defence gave the "highest priority" to the care of injured troops. "We constantly invest in staff, facilities, patient welfare and treatments and this additional £5m will further improve the infrastructure to ensure our injured service personnel get the very best," he said.
In June 2010 Prince William opened the Help for Heroes Rehabilitation Complex at Headley Court, which contains a swimming pool and gym complex.
Headley Court has been treating the war-wounded and sick service personnel since World War II, but has rapidly expanded while treating the wounded from Iraq and Afghanistan. The centre has bed space for almost 100 in-patients but treats many more who return for rehabilitation.