The UK Government has approved a £120.9m ($183m) grant towards a £170m ($257m) project to extend the Manchester Metrolink to Ashton-under-Lyne in Tameside and East Didsbury in south Manchester.
The first 4.5km extension from Chorlton to East Didsbury will cover five new stops at Withington, Burton Road, West Didsbury, Didsbury Village and East Didsbury, and will add three new trams to the route.
A second 3.9km stretch of new track will link the town centres of Droylsden and Ashton, covering four new stops, and will add three new trams to the route.
The Greater Manchester Passenger Transport Executive plans to begin work early in 2011, with the East Didsbury line expected to be finished by summer 2013 and the Ashton line by winter 2013/14.
UK Transport Minister Sadiq Khan said the new routes would help regenerate some of the most deprived areas in the north west of England.
The two new extensions, along with the under-construction extensions to Oldham, Rochdale and Chorlton, are expected to double the capacity of the light rail system.
Regional Minister for the North West Phil Woolas said this reaffirmed the government's commitment to providing one of Europe's best public transport systems.