Funding has been approved by the North West Development Agency for the public realm and infrastructure work at the Greengate development area on the border of Manchester and Salford.
The area comprises features 32 acres of brownfield land and the site of the former Manchester Exchange Station. The site is bounded by Chapel Street in Salford and Gravel Lane and is opposite Manchester Cathedral.
The NWDA said it hopes its assistance will boost the £400m mixed-use scheme planned by Ask Developments, which stalled due to the economic downturn.
The public investment is made up of £3.4m from the NWDA and £1.38m from the European Regional Development Fund, which is managed by the NWDA.
The money will be used for land acquisition, demolition work and to support, with funding from the Homes & Communities Agency of £8.5m, the construction of the Urban Cove, a new area with water features and a pedestrian bridge across the River Irwell.
Later phases of public realm will create a paved square with water features and a light installation underneath the railway viaduct, and another square with lawn and trees and a reproduction of the ancient market place that once stood on the site.
Ask Developments plans 1m sq ft of commercial space and 1,100 residential units. The developer is, in common with the rest of the market, awaiting prelets before starting on site.
Liz Meek, chairman of the European Regional Development Fund's Programme Monitoring Committee, said: "European funding has changed the face of towns and cities across the Northwest. Again and again we have seen how investment in public spaces is the key to attracting private investment. I'm delighted that this important scheme is now back on track."