Local transport minister Norman Baker has announced construction can begin on the £128 million Midland Metro extension.
Mr Baker said: “This scheme will bring trams back to the heart of Birmingham, which is great news for both the city itself and the wider West Midlands.
“It will provide a new, sustainable transport choice for those wishing to reach the city centre’s bustling shopping streets and the emerging business district in Snow Hill.
“The scheme will also cut carbon and create growth by getting more people onto public transport, create1,300 new jobs and deliver a £50m boost to the local economy.”
The Department for Transport will provide £75.4m towards the £128 million cost of the scheme which is being led by Centro, the region’s transport authority, in partnership with Birmingham City Council and the Black Country district authorities.
Centro will also sign contracts for a bigger maintenance depot at Wednesbury as well as construction of the city centre extension.
Centro chief executive Geoff Inskip said: “We are delighted to get the final go-ahead from Treasury and ministers… we will waste no time in pressing ahead with the construction of the extension which, together with the rebuilding of New Street Station, will transform our public transport network.
“Today’s announcement is marvellous news for passengersand represents a further shot in the arm for the Birmingham and Black Country economy.”