India has awarded a $1.7bn contract to supply trainer fighter jets to the UK company, BAE Systems.
Negotiations for the Hawk have gone on for more than a decade
The decision was taken at a meeting of the cabinet's security committee chaired by Prime Minister Atal Behari Vajpayee.
BAE Systems, formerly known as British Aerospace, has agreed to supply 66 Hawk jets in a deal that has taken years to negotiate.
The Indian Government has come under severe criticism for a series of jet crashes caused by pilot error.
BAE Systems said the deal would safeguard more than 2,000 jobs at its factory in northern England.
The Hawk beat a rival bid from a state-run Czech firm.
UK sales of the Hawk have caused controversy, with sales to Indonesia and Zimbabwe coming in for particularly heavy criticism.
Opponents of the sales say that although the Hawks were sold to Indonesia to be used as trainer jets, the military there used them in operations to suppress the East Timor independence movement.
Six year project
"The decision fulfils the long-standing needs of the Indian Air
Force," Defence Secretary Ajay Prasad told reporters in Delhi.
He said India would buy 24 Hawks outright and build the rest under BAE licence in the southern city of Bangalore.
Delivery, he said, would begin three years after the signing of the contract, which has still to take place.
Mr Prasad said all 66 aircraft were expected to be with the Indian Air Force "within the next six years".
In the interim, some Indian pilots will receive training in the UK.
Negotiations over the possible British sale of Hawk jets to India have been going on for over a decade.
Delhi badly needs new jet fighters and trainer aircraft to reduce the high rate of flying accidents in its air force.
The Indian air force started looking for an advanced jet trainer for its newly qualified pilots in 1985.
The BBC's Adam Mynott in Delhi says the litany of crashes since is evidence of how much they are needed.
There have been more than 30 crashes involving the main Indian jet, the Russian-made MiG-21 fighter in the past year.
Over the past decade, 170 MiGs have been lost - almost all to pilot error.
Our correspondent says that, at present, young Indians emerge from training school with little or no advanced jet training and go straight into the cockpit of a MiG-21.
As the number of dead pilots has climbed the Indian Government has faced growing criticism over the delay in finding a suitable training aircraft.
The contract was being seen as good news for BAE Systems workers.
The company said the deal would safeguard 2,200 jobs at its plant at Brough in East Yorkshire, as well as thousands of posts at supplier firms.
BAE chief executive Mike Turner said he was "delighted".
not only great news for BAE Systems but also for the manufacturing capability
and aerospace industries of the UK and is a reflection of the support given by
the UK Government in this bid."
It is thought that UK Prime Minister Tony Blair pushed the case for BAE during
meetings with senior Indian leaders.
Negotiations were bogged down by the issue of price.