Several Government departments have agreed to fund a feasibility study into a 700,000 sq ft office campus on the site of the former Mayfield station, which would bring together civil servants from across Greater Manchester and attract jobs from London.
In total, more than 5,000 civil servants could be based on the Mayfield campus by 2014 as part of the Civil Service in the English Regions initiative.
The announcement comes as Manchester competes with other cities for the relocation of the Ministry of Justice which could require up to 300,000 sq ft.
Beverley Hughes, minister for the North West, said: "This is potentially very significant news for Manchester and for the North West. The Government is committed to moving civil service jobs away from London and the development of the site alongside Piccadilly Station presents a real opportunity for the city to seize the initiative.
"This also opens up the possibility of regenerating an important part of the city centre. I know plans are well advanced for Piccadilly Gate and this is a natural extension of that exciting project."
Government Office for the North West, the Highways Agency and the Training and Development Agency are already due to move into Piccadilly Gate, close to Mayfield, next year. The Training and Development Agency is bringing more than 300 jobs from London.
The new proposal would expand this into a campus containing 700,000 sq ft of office space, accommodating civil servants currently in leased offices across Greater Manchester. It also fits with the Government's plans, announced in the Budget, to increase its target on relocating posts out of London to 24,000 by 2010.
Sir Richard Leese, leader of Manchester City Council, said: "Manchester is now widely recognised as a place where organisations from all sectors want to locate themselves and where they can capture maximum efficiencies and access to a highly skilled workforce. This is an important part of how the city maximises its contribution to regional and national government and to provide employment opportunities to an ever increasing travel to work area.
Next steps will include canvassing government tenants for the campus and preparing a master plan for the wider Piccadilly Station area, extending to the inner ring road to the south, Aytoun Street to the north and Whitworth Street to the west.
Colin Sinclair, chief executive of Midas, Manchester's inward investment agency, said: "The decision by Government departments to fund a feasibility study for locating its major new hub in Manchester is great news for the city region, potentially creating thousands of jobs at a critical time. Taken alongside the Training and Development Agency, NICE and PHSO's recent moves here and the launch of the Civil Justice Centre in Manchester, it is clear that the city region is successfully developing as the location of choice for public sector relocations."