The UK is providing £2 billion of initial support for a new nuclear power station at Hinkley Point in Somerset.
Chancellor George Osborne made the announcement during his five-day visit to China, which is also backing the project.
The price guarantee will pave the way for French firm EDF Energy and its financial partners China General Nuclear Corporation and China National Nuclear Corporation.
The construction and operation of Hinkley Point C is expected to create thousands of jobs and boost the nation’s energy security.
It is predicted to produce enough energy to supply 7% of the country’s power needs – enough for six million homes.
Mr Osborne said the deal will also “open the door to unprecedented collaboration” in the UK and China for future projects.
He added: “Britain was the home to the very first civil nuclear power stations in the world and I am determined that we now lead the way again.
“Nuclear power is cost competitive with other low carbon technology and is a crucial part of our energy mix along with new sources of power such as shale gas.
“It is another move forward for the golden relationship between Britain and China – the world’s oldest civil nuclear power and the world’s fastest growing civil nuclear power.”
EDF, which pushed back its investment decision earlier this year, welcomed the news.
CEO Vincent de Rivaz said: “The Chancellor’s approval of the infrastructure guarantee is a clear sign of the government’s commitment to Hinkley Point C.
“It is further progress towards a final investment decision on a project which will provide reliable, affordable low carbon electricity for decades.”
The UK won approval from the European Commission to guarantee the price of power for the nuclear power station last October.