Culture secretary, Tessa Jowell, has announced the government will back London's bid to host the 2012 Olympic Games.
She said a bid would be good for sport, good for London and good for the whole of the UK.
A decision on whether or not the government would support the bid was to have been made earlier in the year but was postponed in the face of the war in Iraq.
The announcement has been welcomed by both sporting and tourism organisations.
British Olympic Association (BOA) chair, Craig Reedie, said: The decision taken today is the most significant for British sport in generations. The aspiration to host the world's greatest sporting event gives our country, our capital city and all our sportsmen a unique opportunity to excel in every area. It is exciting and very encouraging and rewards the BOA for their many years of effort.
Simon Clegg, BOA chief executive, commented: There will be stiff opposition ahead but I remain convinced that if the government, London and the whole of British sport can act in a united way, there is a very serious prospect of success.
BOA London Olympic Project co-ordinator, David Luckes, added: To produce a world-beating bid than can inspire everyone in this country and abroad is a challenge London will approach with relish.
Sport England chair, Patrick Carter, said: We are a great sporting nation and it is right that London is bidding for the Olympics in 2012. It is vital that sport and all the stakeholders present a united front to ensure this exciting and historic opportunity is fully grasped and given every chance to succeed - teamwork will be the key to success.
Sport England chief executive, Roger Draper, added: This bid will do wonders for the profile of sport at every level. It will ignite interest in sporting success at grass roots level and must be part of an overall strategy for sport. This is an exciting time for sport in this country - now is the time to get serious about it.
A spokesperson for VisitBritain said that a sporting event the size of the Olympic Games raises the international profile of any country hosting it and this, plus the international tourist revenues, will bring huge benefits to London and the whole of Britain.
They added that: Britain has proven itself well capable of hosting an international event, with the success of the XVII Commonwealth Games in Manchester last year.
Tourism Alliance deputy chair, Richard Tobias, said: This is a tremendous opportunity to showcase the very best of Britain and will be a huge boost to Britain's tourism industry before, during and after the games.
He continued: The potential benefits and legacy in social and economic terms to London and the rest of Britain are enormous.
The main focus of the Games will be a new 80,000-seat stadium in Stratford, East London, with an aquatic centre, velodrome and the Olympic Village also being constructed to the east of the city.
Other venues in London would include the new National stadium, currently under construction at Wembley; the Millennium Dome and ExCel Centre in Docklands; the All England Tennis Club at Wimbledon; Hyde and Regents Parks; the Oval and Crystal Palace.
Outside London, shooting would take place at Bisley; sailing at Weymouth; equestrian events at the Royal Veterinary College in Hertfordshire and football at sites across the UK.
In addition to £1bn provided by the International Olympic Committee (IOC), the cost of staging the Games has been estimated at £2.375bn, with funding coming from the government, the Greater London Authority, the London Development Agency and the private sector.
Lottery operators, Camelot, will also launch a special Olympic Lottery game to help pay for the project. The cost of making the bid itself, which will be funded by the government, has been estimated at £17m.
Mayor of London, Ken Livingstone, said: This is wonderful news, not just for the East End, or even for London - it's great news for the country as a whole.
He went on: London has all the physical credentials to host the Games, but its most important asset is its people. With over 300 languages spoken in our schools, we are the place where the world comes together. Every competing nation in the 2012 Games will come to London and find a group of supporters here as fervent as the fans at home.
Several others cities have shown interest in hosting the Games - for which applications must be made to the IOC by 15 July - including Havana, Leipzig, Madrid, Moscow, New York and Paris.
In January 2004 the cities will outline their bids, in June the IOC will decide which cities to accept as candidates and in November the accepted cities will put forward their complete bids.
The final decision on where the Games are to be held will be made by the IOC in July, 2005.
