And the task of finding a possible contractor could begin as soon as the end of next month if councillors vote through an Outline Business Case (OBC) for how the work would be completed.
The case to extend the 1A line from York Place to Newhaven is now set to go under the scrutiny of councillors over the coming weeks.
While the case itself could be given the go ahead by the end of September, a final decision on whether to proceed - and with which contractor - would not happen until autumn 2018.
Council leader Adam McVey said: “As the fastest growing city in Scotland, and with our existing system nearing capacity, we have to look at ways of enhancing our public transport system.
“The planned tram extension route takes in Scotland’s most densely populated area. Taken with low car ownership, developing high capacity transport to Newhaven would bring a range of local benefits in terms of boosting economic growth, creating jobs, enhancing accessibility, reducing congestion and improving air quality.
“We’re now working to make sure that the business case is as robust as possible to ensure we have confidence that the project can be delivered on time and on budget.”
A report setting out the business case will go before the city council’s transport and environment committee for approval in principle on September 4.
If this is granted, the case will then go before full council on September 21.
While the finer details are yet to be released, it is understood the case will include information about the introduction of a business compensation scheme for local traders during construction.
It will also set out forecasts for the number of people using the trams, with this figure expected to double to 13 million in the opening year if the extension is carried out.
If all goes ahead, it is thought construction would take approximately three years and, allowing for testing, passengers could expect to use the service in the first half of 2022.
Transport Convener Lesley Macinnes, added: “Only yesterday, we were named the UK’s best city for transport links, demonstrating the success of our continued work to deliver a truly integrated public transport system for the Capital.
“We cannot be complacent, though. We must ensure we keep investing in public transport and sustainable travel, both to cater to ever greater numbers of residents and visitors and to improve our environment.
“The outline business case demonstrates good early performance for the tram, with patronage expected to double in the first year. Crucially, however, it also shows Lothian Buses continuing to operate at the high standard of service we’ve come to depend on.
“We have the opportunity now to study the numbers in more depth before deciding on whether to progress, taking into account the needs of the city’s taxpayers, and ensuring we learn lessons from the past.”