pounds 20m view of Thames for London's new mayor.
Minister for London Mr Nick Raynsford told MPs that the pounds 20 million futuristic structure overlooking Tower Bridge will house the mayor's office, assembly chamber and the authority's 400 staff.
The building has been described as a glass bubble, a soap dish and a fencing mask and it will become the headquarters of the Greater London Authority when it is finished next year.
Mr Raynsford said: "This has been a very close competition with two excellent options, the site at London Bridge City and Victoria House in Bloomsbury Square, to choose from in the final stages.
"I am delighted to announce that we are going ahead with the London Bridge City site. There will be an outstanding new building designed by one of the world's leading architects, Sir Norman Foster, on a prime London site."
Prime Minister Mr Tony Blair is understood to regard the site as ideal because of its stunning views across the capital and its closeness to Tower Bridge, a symbol of the city around the world.
The building, which will occupy 13 acres, will be ready six months after the authority elections in May 2000. It features a new pier to allow the mayor and visitors to arrive by boat.
Ministers were impressed by Sir Norman's glass fronted design, allowing the chamber a clear view of the river, and believe it will reflect the authority's dynamic spirit.
Close to the new Jubilee Line Tube station at London Bridge, the site will also feature a huge complex of offices, shops and a 180-bedroom hotel.
Sir Norman said his new building could be the "catalyst for the creation of 10,000 jobs". He described it as having "extraordinary views" relative to the heritage site of the Tower of London.
The structure would be highly transparent, with four of its ten floors as public spaces and an entrance level allowing free access. Sir Norman described the building as "truly green", with the potential to process renewable energy.
New technology meant that vegetable oil from sunflower or rape seed could be used to make electricity, without creating pollution or carbon dioxide, the chief greenhouse gas, and that excess heat could be stored for use later in the year.
North Southwark and Bermondsey Liberal Democrat MP Mr Simon Hughes said: "Today's announcement is a great decision in favour of a bold building on a brilliant site. It is a brilliant boost for Bermondsey and will add another famous building to the Southwark riverside."
Residents who face eviction because of the new home for the mayor of London, yesterday called on Southwark Council to halt the plan.