Bid for housing millions.
Tees Valley Living wants the money towards housing market renewal work over four years from 2008.
The cash will be used to acquire older properties for demolition and to provide grants for improvements to other older homes.
It is envisaged the cash will lever in big investment from the private sector in new house building.
TVL's bid is a 'daughter' document of the Tees Valley City Region Business Case, also now being submitted to the Government.
TVL is the agency responsible for overseeing housing market renewal in the area.
It believes the funding is crucial to the successful long-term regeneration of the Tees Valley. Without the cash backing, it considers current plans will take significantly longer to complete.
The pounds 120m would provide the core funding for the major intervention in the housing market and could also attract an additional pounds 450m of private sector cash between now and 2016.
Neil Etherington, chairman of Tees Valley Living, said: "We have been working hard and have achieved a lot over the last three years to make the Tees Valley 'investor ready'.
"What we now need from the Government is for it to endorse our strategy and commit funding to the Tees Valley so we can attract further private sector funding and transform the area as a place in which people want to live and work."
TVL Director Jim Johnsone said: "The logic behind this bid is simple. With this funding we will be able to realise our goal of creating high-quality communities where people want to live and work within the next ten years.
"Without it, the regeneration and renewal of the area could take twice as long, prove more costly to central and local government and more disruptive to local people and businesses."
Major housing market renewal work, led by the Tees Valley councils, is already well under way. Middlesbrough Council's plans include 1,500 homes being demolished in Middlehaven and Gresham, Redcar and Cleveland Council are planning a huge scheme in South Bank and Stockton Council plans to tackle older housing areas in central Stockton.
Since 2003 Tees Valley councils have acquired 1,326 homes, demolished 973, built 292 new homes and improved 1,007 existing properties.
Michael Poole, North-east secretary of the National Association of Estate Agents, said: "We need to create a desire for owner-occupiers to return back to the central areas and this will only be achieved by providing adequate housing and a safe environment in which to live."