Spanish firm CAF - which supplied the trains for the Heathrow Express - has been chosen to build and maintain the city's trams which will have the same livery as the rest of the Lothian Buses fleet.
A total of 27 trams are needed for the route between Edinburgh Airport and Newhaven and they will be capable of carrying 250 passengers at up to 49mph.
It is thought the cost of building and maintaining the tram cars will be around 50 million, with French firm Alstom missing out to CAF in the final round of negotiations.
Willie Gallagher, chairman of TIE, the council-backed firm in charge of the project, said the CAF bid came in slightly under the budgeted costs and the savings could be diverted to other parts of the 545m scheme.
He said: "I need to make clear that we have not sacrificed quality for price in this deal.
"We laid down the gauntlet to the world's tram manufacturers and CAF has delivered.
"The competition was intense, which drove the bidders to submit fantastic bids.
"It was a tough decision, but I believe that we are recommending the best bid for Edinburgh." In the next few weeks TIE will reveal who it wants to build the tram lines and other infrastructure, along with a revised business case showing the full costs of the project.
All of these matters will be discussed at a full council meeting on October 25, with approval from councillors needed for the project to proceed.
City leader Jenny Dawe said: "It is really important that we give people a real incentive to leave their cars behind and these trams deliver that. Trams sum up the ambition, growth, great lifestyle and green qualities that we want our city to be about. Costings and future financial predictions are proving positive, showing Edinburgh's tram network will be an asset to our city."
The trams have been designed to cope with the Capital's tight curves and steep gradients and will not be coupled, as is common in mainland Europe. They are expected to last for around 30 years - twice the average lifespan of a bus - with CAF carrying out some of the maintenance work.
Neil Renilson, chief executive of Transport Edinburgh Limited, the company which will operate the trams and Lothian Buses from 2010, said: "It is crucial that the tram system fits seamlessly with the current public transport network and I am fully convinced that the CAF trams will do just that."
Councillor Maggie Chapman, the Green Party's transport spokeswoman, said: "It is great that the tendering process for the tram carriages has been delivered on time and on budget.
"The citizens of Edinburgh deserve a first-class, environmentally-friendly and efficient integrated public transport system, and this is a step in the right direction."
The first trams are expected to be on the city's streets by mid-2010, when TIE will carry out trials ahead of a full launch in late 2010 or early 2011. Passengers can expect the following features:
• All trams will have low-floor boarding at all passenger doorways and there will be no steps to access seats.
• A light, spacious interior and full movement throughout.
• The trams will be around 40 metres long.
• They will have a maximum speed of up to 43mph.
• Capacity for 250 passengers.
• Good luggage provision at floor level.
• Low noise and excellent ride quality.
• Braking performance similar to other road vehicles in an emergency.
• A driving cab at each end of the tram to allow efficient turnaround.
• Multiple, wide doors to enable easy boarding and alighting
• CCTV and emergency call points throughout.
• Real-time information displays and a public address system.