Train operator GNER will pay about £1bn to run rail services from London to Edinburgh over the next decade.
The deal will cost GNER about five times more a year
The Strategic Rail Authority said the firm beat stiff competition to continue operating the intercity East Coast Mainline service.
There are fears of job cuts and fare rises as, at £100m a year, GNER will pay up to five times as much as it currently does to run the service.
GNER says the standard of its trains will remain the same.
RMT leader Bob Crow has warned that firms paying the government to run services could lead to "service cuts and massive fare rises".
The line carries more than 15 million passengers a year and generates revenues of about £400m.
'Paid too much'
GNER competed with Virgin, Danish rail company DSB and UK transport firm FirstGroup to win the contract.
GNER, which has operated the East Coast route since 1996, will run the service for seven years. If performance targets are met, the contract is likely to be extended to 10 years.
While most train firms receive money from the government to subsidise services, GNER pays cash to run the contract.
Some rival bidders are wondering whether the firm had paid too much, the BBC transport correspondent Tom Symonds said.
At present, GNER pays £22m a year to the Treasury to run the line but this is expected to rise to as much as £100m a year.
At one point it looked as if a 20-year franchise would be awarded on the East Coast route.
But a change in policy meant that in April 2003, GNER only got a two-year extension to its original seven-year franchise.
From 1 May 2005, the franchise will run for either seven or 10 years.
Meanwhile, the government has announced a £370m plan to help more disabled people use trains.
Improvements include the provision of lifts and ramps, accessible customer information and more station staff.