Communities Secretary Eric Pickles has confirmed a local enterprise partnership for the county as discussions for Blackburn with Darwen Council to be included in the LEP are at an advanced stage.
A revised county-wide bid led by Lancashire County Council was submitted to the Government in December which had the support of Blackpool Council.
Blackburn with Darwen Council was applying for a local enterprise partnership covering the Pennine Lancashire districts to the east of the county, which had support from Burnley Council.
However, both local authorities have since backed the county-wide bid and are expected to be in involved.
The Government rejected three initial bids last October for separate LEPs, which will replace regional development agencies, in the west around Fylde, the Pennine councils in the east and one large whole-county body.
The Government has wanted Lancashire to be able to bid for enterprise zones and its £1.4bn Regional Growth Fund, which is now open to a second round of bids.
A board consisting of representatives from both the public and private sector will now be appointed to run the local enterprise partnership for Lancashire.
The proposal for a LEP was developed in partnership by local authorities, academic institutions and the private sector; which will have the driving seat when a new body is formed. Lancashire County Council said it will aim to kick-start economic recovery and be led by some of the area's biggest private sector employers, with vital input from small and medium enterprise.
Work is now underway to hold a first meeting of a new LEP board before the end of April, which will enable it to submit a bid to create an Enterprise Zone in the county and improve Lancashire's ability to bid for investment from the Regional Growth Fund.
Geoff Driver, leader of Lancashire County Council, said: "It's good news that we can now proceed with getting a LEP in place and our focus has already shifted to scheduling the first board meeting as soon as possible. We want to work with business to protect and create tens of thousands of new jobs in Lancashire over the next decade and the LEP will have a key role in making this possible.
"A big plus in receiving approval at this stage is that the LEP will be able to put together a bid to form an Enterprise Zone in the next round of applications.
"Local authorities have been required to lead on the preparations for a LEP but what must be recognised now is that this is something businesses will lead on once it is up and running. It is extremely encouraging that many of the county's biggest employers are already involved and their continued input, together with the involvement of small and medium enterprise, will be vital."
Graham Burgess, chief executive of Blackburn with Darwen Council, added: "This is the culmination of some very positive discussions we have all been having over the course of the last few weeks. This is a positive step forward for everyone as it recognises the diverse nature of Lancashire and the unique challenges facing Pennine Lancashire. Now we have this agreement in place we will be able to work in partnership to develop Lancashire as a whole and continue the progress we have been making across Pennine Lancashire."
Approval to proceed with establishing a local enterprise partnership in Lancashire was confirmed in a letter from Mark Prisk and the Rt Hon Greg Clark on behalf of the Department for Business Innovation and Skills and the Department for Communities and Local Government.
A total of 31 LEPs were approved across England last year, including ones for Greater Manchester, Cumbria and Liverpool city region, as well as Cheshire & Warrington.
LEPs will aim to bring civic leaders and local businesses together to stimulate local economic growth.