The city came top of a shortlist which included Bristol, Birmingham, Cardiff, Newcastle/Gateshead and Oxford, winning the support of the 12-strong panel of judges for a programme of culturally themed years leading up to and beyond 2008.

In addition to raising Liverpool’s profile, it is anticipated that the title will bring 1.7m extra visitors to the city, create 14,000 jobs and generate 2bn in extra investment. Glasgow, the UK’s most recent City of Culture – in 1990 – benefited hugely from the award.

Sir Bob Scott, leader of the Liverpool 2008 bid, said: "The judges have given the green light to the most exciting Capital of Culture Europe has ever seen. This is a momentous day for the people of Liverpool, the North West of England and the whole of Britain. Liverpool is at the beginning of a thrilling renaissance."

City council leader, Mike Storey, said: "This is a proud day for the new Liverpool. The decision gives us the opportunity to bring real change for the better."

David Henshaw, Liverpool Culture Company secretary and city council chief executive, added: "We are ready to show the UK, Europe and the world what we are made of. We will make Britain proud."

Features of Liverpool’s time in the spotlight will include the openings of the Fourth Grace, a new icon building for the city’s waterfront; a Museum of Comedy; a World Discovery Centre at the Central Library and the new Museum of Liverpool.

A multi-million pound programme of public squares, open spaces, water features, public art and sculpture and activities throughout the city centre will also take place.

Celebrations during the period will include a Deaf and Disabled Arts Festival, an American/Irish Festival linking New York, Dublin and Liverpool, and a year-long African Festival featuring artists from Africa, the Caribbean and South America.

Graz, Austria, is European Capital of Culture for 2003 and will be followed by Geneva in 2004; Cork, in the Irish Republic, in 2005; Patras, Greece, in 2006 and Luxembourg in 2007. Details: www.liverpoolculture.com