The St James Centre is slated for closure next September, bringing the curtain down on 45 years of retail history.
Developers behind the site’s £850 million redevelopment said the announcement was a “major step forward” and revealed that construction work could begin in autumn 2015.
Shops will continue trading as normal throughout the summer festivals period before the centre is shut for the final time ahead of demolition.
Senior councillors welcomed the announcement as “key milestone” in the road to transforming the East End.
Viewed by many as an unpopular eyesore, the St James Centre will make way for 750,000sq ft of retail space, two hotels, 250 homes and a boutique cinema, as well as new public spaces providing access through the site connecting Princes Street to Leith Walk. The shopping mecca is due to open in early 2020.
Developer TIAA Henderson Real Estate said the newly-dubbed St James Quarter would catapult Edinburgh up the rankings of UK retail destinations – from its current position of 13th to a respectable seventh.
It is thought up to 3000 permanent jobs will be generated by the development, with an estimated £25m pumped into the economy every year.
The new shopping haven will also boast a cycle-friendly zone linking Princes Street, George Street and Leith Walk. It will also include bespoke cyclist facilities such as showers, parking and a bike garage.
City economic leader Councillor Frank Ross hailed the announcement.
He said: “It is great news that the developer is now in a position to announce this key milestone.
“It means that there is a clear timescale for work to start to transform the area at the east end of Princes Street to offer high-quality retail and Grade A office space, hotels, restaurants, a digital theatre and residential units.
“This will create thousands of permanent jobs and add £25m to the Scottish economy each year. We will ensure that we work closely with the developer to offer the appropriate support required when businesses relocate from the St James Centre.”
Gordon Henderson, east of Scotland development manager at the Federation of Small Businesses, said traders operating near the site would require more details about the timetable of the construction project.
It is not yet clear what disruption will be caused once building work gets under way.
Mr Henderson said: “It’s welcome news to hear when the project will get started, because this is a project that has been talked about for such a long time.
“I hope that between now and September there will be more consultation about what impact the works will have on the area.”