However, there have been recent reports that the UK wanted to renegotiate the contract costs.
Defence Secretary John Hutton said: "We look forward to receiving an affordable bid from European industry that will allow us to proceed with a programme that will deliver advanced multi-role aircraft to the Royal Air Force and maintain high-technology skills and industrial capability across the UK and Europe.
"Subject to the satisfactory outcome of these negotiations, I hope that we will be in a position to sign a contract later this year."
There are currently Typhoon fighters based at RAF Coningsby, in Lincolnshire, and the combat aircraft will start arriving at RAF Leuchars, in Fife, in 2010.
They are seen as replacements for the RAF's Tornado fleet.
Wing Commander Gav Parker showed off the Typhoon last year
The MoD said the plans would help sustain 5,000 jobs at BAE Systems, 4,000 throughout aero-engine maker Rolls Royce and its supply chain and 2,000 jobs in radar manufacturing in Edinburgh.
A spokesman said these formed part of a total of 16,000 aerospace jobs across the UK industry which would be supported by the Eurofighter programme at peak production.
Steve Radley, director of policy at the Engineering Employers Federation, said: "Today's decision will provide some much needed certainty over orders for the UK's defence sector and will help safeguard skilled jobs throughout the supply chain.
"However, it also underlines the need for a new approach which gives industry clear signals on where the government's long-term priorities lie."
Ian Godden, chief executive of the Society of British Aerospace Companies, also welcomed the move.
But he warned it did not "remove fully some of the uncertainty" over the long-term future of the programme, which he said supported thousands of UK jobs, particularly in the north west of England.
Critics have raised concerns that the Typhoon is outdated but last year the Royal Air Force cleared it fit for carrying out ground attacks in addition to its original air defence role.
Technical data: Two Eurojet EJ200 turbojet engines; Thrust - 20,000lbs; Top speed - 2 Mach; Max altitude - 19.8km (65,000ft); Equipped with advanced ECR90 radar; Aircrew - One
Armament: One 27-mm Mauser cannon; long-range Advanced Medium Range Air-to-Air Missile (AMRAAM), Advanced Short Range Air-to-Air Missile (ASRAAM); various air-to-ground weapons
Manufacturers: BAE Systems (UK), EADS Deutschland (Germany), EADS CASA (Spain), Alenia Aeronautica (Italy)
In service with five air forces: Germany, Italy, Spain, United Kingdom and Austria
Number of planes ordered: 232 for the UK, 180 for Germany, 121 for Italy, 87 for Spain, 72 for Saudi Arabia and 15 for Austria
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