Fibre optic cables will be laid, linking exchanges to street-side boxes
Super-fast broadband will be on offer to thousands of internet users in Glasgow and Edinburgh by next year.
BT will install fibre optic connections between exchanges and street-side cabinets, serving 34,000 customers.
The service will offer download speeds of up to 40Mbs (megabits per second) - 10 times faster than typical existing broadband connections.
Such speeds would allow family members to watch different HD films while others play online games.
BT plans to invest £1.5bn by 2012 to ensure 40% of UK homes and businesses have access to super-fast broadband.
Initially the service will be available to 30,000 properties served by exchanges around Glasgow University and in the Hillington Park innovation centre.
In Edinburgh, 4,000 customers in Stockbridge and the New Town will have access.
Steve Robertson, of BT Openreach, said the service would be available to rival internet service providers (ISPs), leading to competitive pricing.
"Once again, Scotland is at the forefront of one of the most important projects to take place in recent years," he said.
"It will play a vital role in the UK's future as a knowledge-based economy."
The technology will initially offer downstream speeds of 40Mbs, which could later rise to 60Mbs. Upstream speeds will be up to 10Mbs, allowing improved upload times and video conferencing.
The Scottish Council for Development and Industry (SCDI) said it would provide an important tool for raising productivity.
Chief executive Dr Lesley Sawers said: "Our key industries, from financial services to renewable energy, the creative industries and life sciences, are ever more data-dependent, producing, sending and managing vast quantities of information around the world.
"The new electronic networks are essential to this development."
First Minister Alex Salmond said the fibre-based networks would complement the Scottish Government's programme to extend affordable broadband services.
"This service will give customers in two of the country's biggest cities even greater access to the opportunities and services that the internet offers," he said.