Construction of the £16bn Crossrail project will begin in 2010, Transport Secretary Ruth Kelly has said.
The mayor will impose a levy on business rates to raise funds
The scheme to create an east-west rail route across London is the biggest transport project in the UK since the construction of the Channel Tunnel.
In a written statement to MPs, Ms Kelly said London Mayor Ken Livingstone would contribute £7.7bn and hoped services would begin in 2017.
She said the Department for Transport would provide £5.6bn for the project.
This includes contributions from the City Corporation and airport operator BAA.
Speaking about the contribution from Mr Livingstone, she said: "He (Mr Livingstone) indicated that he would like to do this from a combination of debt raised on the back of a new levy on national non-domestic rates in London, TfL prudential borrowing, developer contributions along the Crossrail route and other sources."
The company responsible for delivering the scheme, Cross London Rail links, will become a 100% owned Transport for London subsidiary, Ms Kelly added.
She said final arrangements would be in place by the time the Crossrail Bill receives Royal Assent.
"This should allow construction to begin in earnest in 2010, with the first services following in 2017," she added.