The remainder of the cash will come from the Government, who will offer Manchester around £1.5bn from the Transport Innovation Fund (TIF) to expand the Metrolink tram system, bus services and other transport schemes.
Cash will be supplemented by revenue from a congestion charging scheme that will cost motorists up to £5 per weekday.
Motorists will pay £2 to cross the M60, and a further £1 to cross an inner congestion ring in the morning, and the same to re-cross those boundaries when leaving in the evening.
Fares will apply at peak times only, and be capped at £5 per day.
Assuming the government approves the cash, then a majority of Greater Manchester councils must vote to approve the scheme. So far, 7 out of 10 councils have pledged support, although the change in council make-up following May's council elections may change this.
Manchester has already benefitted from an extension of the Metrolink tram system in a £575Mpackage announced last month. New lines will be built to Oldham and Rochdale, Droylsden, and Chorlton in South Manchester. This will nearly doube the size of the network.
Under the TIF deal, the Metrolink will extend further, with a second route to Rochdale and Oldham town centres, and services to Ashton under Lyne, East Didsbury, Manchester Airport and the Trafford centre, in addition to a second route around the city centre.
Rail services will have more carriages, and buses will have the priority on roads. Bolton, Salford, Altrincham, Stockport, Ashton and Rochdale stations will be adapted to become "interchanges", linking into other types of transport. A map of the first phase of expansion can be viewed here.
The government is expected to make the announcement later today in Rochdale.