The franchise to run the expanded Thameslink rail network has been awarded to Govia Thameslink, a joint venture majority-owned by Go-Ahead.
The new Thameslink, Southern and Great Northern (TSGN) franchise will run for seven years from this September.
The rail franchise is the largest in the UK in terms of passenger numbers, trains, revenue, and staff.
The government said the franchise would open new routes across London and improve commuter services.
It added that nearly 1,400 extra carriages would be supplied by the end of 2018, increasing capacity by 50% during the peak morning rush-hour into central London.
The newly-created TSGN franchise replaces the existing Thameslink and Great Northern franchise - more familiar to passengers as First Capital Connect - and the South Central franchise, which includes Southern and Gatwick Express services.
Govia - which is 65%-owned by Go-Ahead and 35%-owned by French firm Keolis - already runs Southern Railways, London Midland and South Eastern train services, and previously ran Thameslink between March 1997 and March 2006.
First Group, which has been running Thameslink services since 2006, had also bid for the franchise.
First Group said it was disappointed not to be awarded the contract. Tim O'Toole, FirstGroup's chief executive, said "We submitted a strong bid which would have delivered high quality services for passengers, value for taxpayers and an economic return for shareholders."
The government said the TSGN franchise would form a key part in delivering its £6.5bn Thameslink investment programme.
Up to 24 trains per hour will travel in each direction along the Thameslink route after the investment programme is completed.
New tunnels will link Peterborough and Cambridge to the existing Thameslink route, providing greater access across London via St Pancras to Gatwick and Brighton.
Services to destinations along the Thameslink route including Brighton, Kings Lynn, Peterborough, Cambridge, and Gatwick Airport will be improved.
A small number of services and stations will also transfer from the Govia's Southeastern franchise into the new TSGN franchise in December 2014.
The DfT said Govia would invest significantly in improving station facilities including free wi-fi at more than 100 stations, better retail and catering facilities and improvements to customer information systems.
David Leam, head of infrastructure at business group London First, said the new franchise would greatly improve journeys on key north-south routes across London.
He added: "As the first franchise let since the West Coast Mainline debacle this is also an important moment symbolically for the government.
"Passengers and taxpayers have suffered as a result of the delayed franchising programme so it's good news all round that it's now back on track."
The new franchise is being let as a management contract where ticket revenues are passed directly to the government rather than retained by Govia, the train company said.
It is the first time a rail franchise has been awarded under such terms.
A Department for Transport (DfT) spokesman said train fare and season ticket pricing policy would be unaffected.
The government will pay £8.9bn to Govia over the course of the seven year franchise with the government expecting to receive around £12.4bn back in ticket sales from Govia by the end of the franchise.
The DfT spokesman said the new contract reduced the chances of rail operators "handing back the keys" to the government as happened with the East Coast mainline.