The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, gave the go-ahead to the proposal citing the growing transportation needs of the city.
According to the proposal, the project will be developed on a 38.21 km stretch by a newly-formed joint venture (JV) company.
The JV company will be owned by the central government and the government of Maharastra on a 50:50 basis.
"The cabinet has approved the development of metro rail in Nagpur. Nagpur is a big city and is growing. Metro will add to easing the city transport there," Telecom, IT and Law Minister Ravi Shankar Prasad announced after the cabinet meet here.