West Ham will take on a 99-year concession at the iconic Olympic Stadium, moving in in time for the 2016/17 season.
The Legacy Corporation is also looking to accommodate matches from the 2015 Rugby World Cup during the transformation work.
The stadium will have a capacity of 54,000, with a new roof, corporate areas, retractable seating and adaption works.
The London Legacy Development Corporation will provide funding, while West Ham will contribute £15m, Newham £40m and £25 from central government, as required.
Mayor of London Boris Johnson called the deal a “a truly momentous milestone for London’s spectacular Olympic Stadium” that would secure a credible and sustainable future.
“Through this deal with West Ham United FC, we are defying the gloomsters who predicted this landmark would become a dusty relic,” he added.
“With a series of world-class entertainment and sporting fixtures already in the bag for Queen Elizabeth Olympic Park, this iconic site is set to be the glittering centrepiece of ambitious regeneration plans for east London, which will capitalise on the Olympic investment into this area for the long-term benefit of this city.”
West Ham FC vice-chairman Karren Brady said: “I’m delighted that we have been confirmed today as the anchor concessionaire for the Olympic Stadium.
“I commend my two chairmen for their passion and commitment. I am delighted this has been rewarded now that their ambition to see the club they love enjoy a bright future at the iconic Olympic Stadium has been realised.”
Newham mayor Sir Robin Wales said: “Our investment of £40m secures that legacy by transforming the Olympic Stadium into a world-class attraction and the beating heart of Queen Elizabeth Olympic Park.
“This will provide us with a share of the profits generated over the long term and a range of community benefits for Newham residents.
“We will now work with our partners to transform and develop the stadium and island site into one of London’s premier destination venues and a home for sport and entertainment for generations to come.”
A joint venture – E20 Stadium LLP – will be set up to manage the transformation, which will include a new 400 m community track.
West Ham was named as preferred bidder late last year, feending off competition from the University College of Football and Business, Leyton Orient FC and Intelligent Transport Solutions – who proposed an F1 race track around the park.
Newham residents will hold a minimum 35 per cent equity share in the stadium and island site.