The plans for a new stadium were first mooted in 2002

It means work on the £38m stadium in Leckwith, near the club's current Ninian Park ground, is due to begin in March and be ready by the end of 2008.

The stadium project, which includes a retail development on the 60-acre site, has been dogged by delays.

The council had been reluctant to give it the go-ahead until assurances over the viability of the plans.

On Monday, the council announced it was recommending councillors to approve the business plan presented by the club, who are top of the Championship.

The matter will be considered by the council's scrutiny and executive committees in December.

Cardiff Council leader Rodney Berman said: "I see this as a huge step forward, not only for the football club but for the city of Cardiff as well."

He said the council could be "satisfied that a new stadium can be successfully delivered at Leckwith without any ongoing financial impact on the residents of Cardiff".

Today's announcement is truly a milestone for Cardiff City Football Club Peter Ridsdale, Cardiff City FC

A new athletics stadium is to be built as part of the deal, he said.

"Work should start in the new year, once the club and its commercial partners have finalised arrangements with their contractors."

As part of the business plan, a "leisure and lifelong learning facility" called The House of Sport will be set up, as well as improvements such as parking controls and a park and ride.

A contribution of £500,000 will be made for the regeneration of a nearby shopping centre, and for Ninian Park to be redeveloped for housing.

Sport academy

He also announced that as part of the plans, a sports academy for young people will be set up using funds from the club.

"I am delighted to announce that an exciting new agreement has been reached with the club that if they play in the Premiership, they will make a £250,000 contribution each year to a bursary which will be administered by CCFC and the council," said Mr Berman.

"A £100,000 donation will be made each year while the club plays in the Championship.

"This funding will be dedicated to developing footballing skills amongst schoolchildren and young people in Cardiff and the surrounding region through a sports academy."

Club chairman Peter Ridsdale said: "Today's announcement is truly a milestone for Cardiff City Football Club.

"Many people have been involved in getting to the stage where the talk has now turned into reality.

"From a position where the club's very existence was in question, we can now look forward to the day when we will be playing in a new stadium which will give us a real chance to compete with the very best in professional football," he added.