An RAF base in Shropshire has lost a training contract worth £16bn.
A learning resource centre could come to RAF Cosford
Defence Secretary Des Browne confirmed RAF St Athan in south Wales has been chosen ahead of RAF Cosford.
The new armed forces tri-service centre is expected to create about 5,000 jobs. The decision follows a review of defence training needs.
Mr Browne said there could be job cuts but Cosford, which employs 1,700 people, and Blandford Camp in north Dorset would not close.
There were fears up to 800 civilian jobs could go at Blandford if it was sold by the Ministry of Defence (MoD) in light of the decision.
A spokesman for Shropshire County Council said the decision was "bitterly disappointing news for Cosford and the people who work and live there".
But the council will continue to discuss options for the base with the preferred bidders, the Metrix Consortium, which could include a national manufacturing skills academy.
The new programme will see training - currently carried out on about 30 bases - held at just 10 sites, with the main campus at St Athan.
Protest over changes
The academy will teach skills ranging from aeronautical engineering to security.
Recruits from the Army, Navy and RAF will all be trained at the centre with the new academy expected to be fully operational by 2013 training 10,000 armed forces personnel.
It is estimated the successful bid would give the local economy a £2.5bn boost.
Last summer workers at RAF Cosford, which provides vital financial support to surrounding villages, campaigned against the proposed changes in training for the armed forces in a candlelit vigil in Whitehall.
'Responsive and effective training'
But the decision to chose St Athan marks the largest single investment in Wales and follows setbacks in making the Vale of Glamorgan site a centre of aviation excellence.
Mr Browne said it would deliver the investment needed to modernise the ways forces personnel are trained.
Mr Browne said: "Overall this will have a varying impact across nine sites: Arborfield, Bordon, Blandford, HMS Collingwood, Cosford, RAF Cranwell, RAF Digby, HMS Sultan and St Athan.
"It is about providing a more flexible, responsive and effective training system, and at the same time improve living and training accommodation for our people," Mr Browne said.