Motorists will be offered subsidies of up to £5,000 to encourage them to buy electric or plug-in hybrid cars under plans announced by the government.
It is part of the government's £250m plan to promote low carbon transport over the next five years.
But ministers do not expect eligible cars to hit the showrooms until 2011.
The car industry as a whole welcomed the plan, but George Osborne, the shadow chancellor, dismissed the initiative as a "fantasy announcement."
Critics said the government needed to invest more in places to recharge the vehicles and in public transport.
The strategy includes plans to provide £20m for charging points and other necessary infrastructure. At present they are very limited.
Transport Secretary Geoff Hoon said that there was huge potential to reduce emissions, with less than 0.1% of the UK's 26 million cars now electric.
The available funding would only be for fully electric and plug-in petrol-electric hybrids. As such, currently commercially available hybrids, such as the Toyota Prius, would not be eligible.
There is a limited range of electric vehicles on the market, which range in price from about £8,000 to more than £80,000 for high-performance models.
Sales have been held back by a number of factors: They commonly have a limited range of about 40 miles, take several hours to charge, and have only two seats.
But the government hopes to target drivers of a new generation of all electric or plug-in petrol-electric cars, which are expected to go on sale in two years time.
Business Secretary Lord Mandelson said: "When people see the electric car - the speed, the lack of noise - they are going to fall in love with it."
"We need to lead this green motoring revolution," he added.
Speaking at a racing circuit in Dunfermline, Geoff Hoon said the plan was about "encouraging the idea that electric vehicles will become part of everyday life, that people will take them for granted and they will look and feel the same as any other car".
Jay Nagley, an analyst at Spyder Automotive, said the announcement was very significant for the car industry.
"The big problem is that the next generation of electric cars will initially be very expensive to make - manufacturers say about double the price of a petrol car," he told the BBC.
"Without subsidies, nobody will buy them, so manufacturers won't be able increase production and get the price down."
Mr Nagley added that by 2020 about a quarter of all cars sold could be electric.
But the RAC Foundation, which lobbies on behalf of British motorists, questioned the amount of money being spent by the government, and how it would be put to use.
"If the whole £250m were divided up so £5,000 is allocated per person, this would only put an extra 50,000 electric cars on the road - out of an annual total of some 2.7 million cars sold in the UK," said director Stephen Glaister.
Environmental campaigners Friends of the Earth said that financial support for electric cars was a step in the right direction but said investment in public transport was also needed.
"Electric cars are only as green as the electricity they run on - ministers must do far more to boost the UK's flagging renewable energy industry," said the group's transport campaigner Tony Bosworth.
Shadow chancellor George Osborne said that the government's announcement lacked detail on the measures needed to make electric cars a mainstream reality.
He said more information was needed on how the higher demand for electricity would be managed and on how a national network of car charging points would be created.
"The Labour plan announced today is like giving people a grant to buy an internal combustion engine, without bothering to set up any petrol stations," he said.
The Liberal Democrat shadow transport secretary, Norman Baker, said the government scheme was a gimmick that would only benefit the few.
"Discounts on electric cars are all very well for those who can afford to buy a new car but it cannot hide the fact that the government has forced up rail fares and destroyed many local bus services," he said.
Government incentives to stimulate the sales of cars are spreading.
In a separate initiative, Chancellor Alistair Darling is expected to reveal an incentive scheme for motorists to trade old cars in for new ones in next week's Budget.
This could provide £2,000 for car owners to trade in their old cars to buy new ones.
The plan is designed to boost demand for new cars and help struggling carmakers who are suffering during the recession.
Similar schemes have proved successful in boosting new car sales in continental Europe.
In Germany, for example, car sales increased by 40% in March compared with a year earlier.
Critics of the scheme, however, have complained about the environmental impact of encouraging people to buy new cars.
And they have argued that the overall effect on the industry will be limited as they believe buyers have simply brought forward purchases they intended to make anyway.