The Executive has agreed to establish a graduate medical school at Ulster University's Magee campus in Londonderry.
The announcement brings to an end almost two decades of campaigning to develop the college in the north west and plans are already under way to allow the first student intake of 70 to begin in September 2021.
"This is a hugely important investment for the north west," said Deputy First Minister Michelle O'Neill, making the announcement during yesterday's Executive Covid-19 conference.
Mrs O'Neill said the move came after other executive funding commitments for the Derry and Strabane City Deal and the inclusive future fund targeting unemployment in the region.
"It will greatly improve and prove to be instrumental in the regeneration of the region, and will help to support also our health service, who we much rely on at this point and also into the future," she added.
The British Medical Association (BMA) said the announcement was "a very welcome piece of positive news".
"Covid-19 brought the chronic medical staffing gaps in our health service into sharp focus, as the enlisting of retired doctors and early graduation of final year medical students showed," BMA NI chair Dr Tom Black said.
"This new school will mean more medical students graduating annually in Northern Ireland and then staying on, not only to treat our growing and aging population but to support our health service should such a pandemic like this ever happen again."
Plans for a medical school in Derry first surfaced in the mid-2000s, and were initially submitted to the General Medical Council in 2016.
But the project has been beset by delays and funding problems and looked to be finally ended with the collapse of Stormont in 2017. However, the plan was included in the New Decade, New Approach deal that saw the restoration of the devolved government in January.
In May 2019 the UK Government announced £100m for the Derry and Strabane City Deal. The bulk of that, and match funding from Stormont announced earlier this month, has been earmarked for Ulster University's expansion in the area.
SDLP leader and Foyle MP Colum Eastwood welcomed the announcement but said further detail is needed. "We need a guarantee from the Executive and from Ulster University that the first students will enrol starting in September 2021 and we need to see a plan for university expansion beyond that. The medical school is the first step, not the end product," he said.
Foyle Sinn Fein MLA Karen Mullan said the school's go-ahead is "a major boost for Ulster University and for Derry".
Foyle DUP MLA Gary Middleton added: "We have been working with all parties in Londonderry to move this issue forward and make it a reality.
"It is a symbol of what can be done when people work together. I hope in 2021 we will be able to see the first students enrolled. It will be good for the north west but also for the health service."
Alliance Health spokesperson Paula Bradshaw MLA said the school would complement and enhance the existing provision at Queen's University. "This will provide a route for graduate-entry medical study and I hope it will encourage people into the medical profession right across Northern Ireland, in all places and all sectors.
"There is a particular issue currently with general practice in more remote, rural areas and this is a firm step towards trying to address that particular problem, and ensuring there is balance in our provision of medical training," she added.