The West Midlands Combined Authority will fund a third of the redevelopment costs of Alexander Stadium in Birmingham.
The authority has agreed to contribute £25 million towards expanding the athletics stadium in Perry Barr which will play a key role in the 2022 Commonwealth Games.
Its board agreed the new funding at its latest meeting to go towards the £72.5 million cost of regenerating the stadium which will host the opening and closing ceremonies and all of the track and field events.
Alexander Stadium's permanent capacity will increase from 12,700 to 17,000 spectators while temporary stands installed for the games will boost the limit to more than 30,000.
Plans also include a 400m, six-lane warm-up track and re-laying of the nine-lane competition track.
The stadium is close to the new athletes' village on the old Birmingham City University campus and Perry Barr station which is also set to be regenerated ahead of the games.
Deborah Cadman, chief executive of the combined authority, said: "Our fundamental role is to provide opportunities for economic growth, job creation, an enhanced environment and improved wellbeing for our citizens across the region.
"The redevelopment of Alexander Stadium fits firmly with our objectives and, along with other schemes, including the athletes' village and the ‘sprint' rapid bus network, will kick start the further regeneration of Perry Barr to improve the quality of life of people living and working in the area.
"The stadium is a key facility for ensuring the success of the games which will bring broader investment providing a wider West Midlands' legacy."
Clive Heaphy, acting chief executive at Birmingham City Council, added: "Birmingham is a sporting city, with a great heritage for staging events and major championships, the biggest of which will be the Commonwealth Games in 2022.
"I'm delighted that the combined authority has committed to investing £25 million in the stadium and that it continues to work with us and all our partners in showing its support.
"As part of hosting the games, Birmingham is receiving huge investment and it is a great opportunity for us to really transform the city and change the lives of our citizens long after the 11 days of sport have finished."
