"Metrolink has been at the heart of Greater Manchester's transport system for more than a decade. Carrying 20 million passengers a year, it has been providing an excellent service to local residents and commuters," said Kelly.
"These much-anticipated improvements will make a huge difference to local public transport, and are expected to carry an extra 10 million passengers a year.
"Giving final approval to these plans reflects the Government's commitment to providing convenient, reliable and comfortable public transport. This ensures people have a real alternative to using their cars, and supports my aim to tackle congestion and reduce harmful pollution."
The extensions will go from the city centre to Oldham, Rochdale, and Chorlton as new track and new stops are created. Work will also include upgrades such as rejuvenating disused rail routes for the trams to run on. This will in turn contribute to faster journey times and more frequent services.
This £244m investment represents the final allocation of the £520m dedicated by the Government to Greater Manchester transport improvements in 2004.
Greater Manchester Passenger Transport Executive (GMPTE) is also constructing a further extension to the Metrolink network, separately funded, to Droylsden in the east of the city.
The first phase of Manchester Metrolink opened in 1992 between Bury and Altrincham and was then extended to Eccles in 2000.
Conditional Approval for the extensions was granted by Transport Secretary Douglas Alexander in July 2006.
Final approval was granted by Transport Minister Tom Harris in May 2008.
The extension to Oldham and Rochdale, which plans to open in 2012, will be around 23km long. Work will include a conversion of Oldham's existing Loop rail line to Metrolink operation, allowing direct access to Manchester City Centre and Piccadilly rail station.
The section to Chorlton in South Manchester will be 4km long and is expected to open in 2011. The disused railway line between Trafford Bar and Chorlton would be converted to Metrolink use as far as St Werburgh's Road. The extension provides improved access from the densely populated areas of Firswood and Chorlton to Manchester city centre and links them directly with growing job opportunities on the Oldham - Rochdale corridor and, with one interchange, Salford Quays.
A further extension to Droylsden in the east of the city is being funded locally.
Further extensions to Metrolink are included within Greater Manchester's Transport Innovation Fund bid, which is currently being considered by the Department.