Manchester City Council has approved plans for the development of a new £110m theatre and arts venue at the former Granada TV site by 2019.
The Government pledged £78m in last year's autumn statement towards The Factory project as part of its Northern Powerhouse initiative.
The council said Manchester's creative economy is also increasingly important and a new, large scale arts centre is seen as the next critical piece of infrastructure to support the area's 'creative eco-system'.
It is anticipated that will act as a catalyst, encouraging other creative industries and specialist suppliers to cluster around it, establishing Manchester as the country's most important arts and cultural employment centre outside London.
It is calculated that within a decade it will help create, directly or indirectly, the equivalent of almost 2,500 jobs and add £138 million a year to the economy, the council said.
The Factory (pictured) will be located at the heart of a new creative village, St John's, in the former Granada Studios site in Manchester city centre.
This new neighbourhood - which a report says will 'create vibrancy similar to Covent Garden in London' - will cover six hectares and also involve residential and office development with 15,000 sq m of creative performance space, 13,000 sq m of retail and hotel accommodation, 60,000 sq m of office space and 3,000 homes.
It will also feature public open space, including a new riverside park.
