Driverless cars will be tested for the first time in a UK town after £1.5m was made available from the government.
The "pods", which will travel at 12mph (19km/h), will ferry people around Milton Keynes on designated pathways.
Twenty driver-operated vehicles will be running by 2015, but it is hoped 100 fully automated versions will be introduced by 2017, the Department for Business, Innovation and Skills said.
Similar pods currently operate at Heathrow Airport.
It forms part of a £75m government scheme to enable businesses to make and test low carbon technologies, which it says will keep the UK at the forefront of engine design and help to safeguard up to 30,000 jobs in engine production.
The electric-powered pods can be booked via a smartphone app and will be able to accommodate two passengers.
While travelling, they will use sensors to avoid obstacles.
In the automated versions, passengers travelling to their selected destination will be able to browse the internet, check emails, read the newspaper and play games inside the pod. The cost of each journey has not yet been decided.
If successful, they could be used in other towns and cities across the UK, the government said.
Business Secretary Vince Cable said: "By 2050, very few - if any - new cars will be powered solely by the traditional internal combustion engines, so it is important that the UK car industry is at the cutting edge of low carbon technologies."
Early collaborators on the project include the engineering firm Arup and the universities of Cambridge and Oxford.
Google has been licensed to experiment with driverless vehicles in the US, claiming that in testing it logged more than 300,000 miles (482,803km) in its cars without an accident.
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