The City Deal will fund major infrastructure projects in Glasgow and the surrounding region in a bid to boost the economy for the next 20 years.
The area's economy could benefit from a permanent boost worth £2.2 billion a year as a result while 15,000 jobs could be generated while construction work is taking place.
A further 28,000 permanent positions could be created once the building work is finished, with the deal also aiming to attract an additional £3.3 billion of private-sector investment.
The City Deal is being funded with £500 million from both the UK and Scottish governments while local authorities in the area will borrow a further £130 million.
Chief Secretary to the Treasury Danny Alexander, Holyrood local government minister Derek Mackay and Glasgow City Council leader Gordon Matheson have all now signed the deal.
Mr Matheson hailed it as "a momentous day for the Glasgow city region", adding: "The benefit this funding will bring to our infrastructure, economy and labour market will be felt for decades through tens of thousands of new jobs and increased competitiveness.
"I look forward to working with all of our partners to deliver this hugely important project in the years to come."
Mr Alexander said: "This is fantastic news for residents of the city and the Clyde Valley region, as it means those who know Glasgow best - the people who live and work here - can decide where this investment can benefit them and their families most."
Mr Mackay said: "As our largest city, Glasgow is central in driving economic growth.
"That is why the Scottish Government has agreed to invest £500 million in a city deal for Glasgow and the Clyde Valley that delivers significant benefits for the region and Scotland as a whole.
"The funding will create jobs and help cement Glasgow's position as one of Europe's leading cities with a vibrant, thriving economy."