A memorial to the 52 victims of the 7 July bombings will be located in Hyde Park, the government has announced.
There had been initial plans for a memorial in Tavistock Square - site of one of the four attacks on 7 July 2005.
Following consultation with bereaved families, however, Hyde Park has been chosen "due to its prominence, history and central London location".
The government has committed up to £1 million to fund the memorial, first announced in February 2006.
"Fifty two innocent people were murdered on 7 July in the worst terrorist atrocity London has ever seen," said Culture Secretary Tessa Jowell.
"A permanent memorial will provide a dignified and tranquil space for their friends and families - and the country - to remember them.
'Site is significant'
"I am very grateful to the bereaved families for the continuing involvement in planning for the memorial, and I am glad that we have been able to find a suitable location."
The 7 July bereaved families support group has welcomed the announcement.
"The agreed location represents the enormity of our loss, on a personal and a public level," said a spokesperson.
"As we wished, this site is significant, in the centre of London and in a place that is recognised throughout the world.
"Since 7 July 2005 we have campaigned for a memorial that will forever remind people of the events of that horrendous day.
"We thank the Department for Culture, Media and Sport for their ongoing support.
"We will now work together to ensure that a suitable and fitting memorial is created to honour the lives of our loved ones.
"The innocent victims who were murdered must never be forgotten."
The formal process to commission the memorial also began on Thursday, with an advert inviting companies to express interest in working on the project.
The Department for Culture, Media and Sport (DCMS) and the Royal Parks Agency will manage the work, in consultation with the bereaved families.
Councillor Robert Davis from Westminster City Council said he was "pleased that a suitable location has been found to victims of terrorism".