DONG Energy has made the final investment decision to construct the 1.2 gigawatt (GW) scheme Hornsea Project One which will be able to power more than a million UK homes.
The scheme, 75 miles (120km) offshore and spanning 160 square miles (407 square kilometres), will provide 2,000 jobs during construction and support up to 300 additional jobs once it is in operation.
It will use 174 of the vast seven megawatt (MW) offshore wind turbines, each of which are 190 metres (623ft) tall - higher than the Gherkin building in London - to generate enough clean energy to power more than a million homes.
Brent Cheshire, DONG Energy UK's country chairman, said: "Hornsea Project One is a world-leading infrastructure project being built right here in the UK.
"It is ground-breaking and innovative, powering more homes than any offshore wind farm currently in operation.
"We are making a major financial investment to construct this giant wind farm and this underlines our commitment to the UK market. Hornsea Project One will support the supply chain and help create local jobs.
"To have the world's biggest ever offshore wind farm located off the Yorkshire coast is hugely significant, and highlights the vital role offshore wind will play in the UK's need for new low-carbon energy.”
Energy and climate change secretary, Amber Rudd, added: "Thanks to government support the UK is the world leader in offshore wind energy and this success story is going from strength to strength.
"DONG Energy's investment shows that we are open for business and is a vote of confidence in the UK and in our plan to tackle the legacy of under-investment and build an energy infrastructure fit for the 21st century."
She said the project meant secure, clean energy for the country and jobs and financial security for working people and their families.
Hull is set to support the project, with Siemens named as preferred supplier for the turbines.
And a £25m contract has been awarded to UK company Balfour Beatty for the construction of the onshore sub-station.
Building the wind farm will also involve constructing the world's longest electrical system, with more than 560 miles (900km) of cables to bring the electricity produced by the wind turbines to shore and feed it into the national grid.
DONG Energy has the rights to Hornsea Project Two and Hornsea Project Three, which have the potential of three GW of offshore wind power capacity in total.
The project is scheduled for completion by 2020.