In a statement to Parliament, Business and Energy Secretary Greg Clark revealed negotiations will be held with Hitachi, the owner of developer Horizon Nuclear Power, on proposals to develop the £12 billion facility.
Located beside the former Magnox Wylfa Power Station, the new power station will feature two nuclear reactors generating 2,700 megawatts, producing enough electricity to power around five millions homes.
In addition, it is estimated the project will create up to 9,000 construction jobs.
Speaking in Parliament on Monday, Secretary Clark said: "I am pleased to confirm that today Hitachi and the UK Government have decided to enter into negotiations in relation to the proposed Wylfa Newydd project.
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"This is an important next step for the project, although no decision has been yet taken to proceed, and the successful conclusion of these negotiations will of course be subject to full Government, regulatory and other approvals, including but not limited to value for money, due diligence and State Aid requirements."
Continuing, Mr Clark added a key focus of the discussions is "achieving lower cost electricity for consumers".
"Both the National Audit Office and the Public Accounts Committee have recommended that the Government consider variations from the Hinkley Point C financing model in order to reduce costs to consumers," he said.
"In line with the NAO and PAC's clear findings and recommendations, for this project the Government will be considering direct investment alongside Hitachi, and the Japanese Government agencies and other parties.
"If the Wylfa project were to go forward following this period of negotiation, it would provide around 6% of our current electricity needs until nearly the end of the century, whilst supporting thousands of jobs during construction and operation, particularly in Wales."
Duncan Hawthorne, Chief Executive Officer at Horizon, welcomed the announcement.
He said: "This announcement is fantastic news for Anglesey, the nuclear industry, and Horizon, as well as a clear signal of the Government's commitment to delivering a low carbon future for the UK.
"Building on last year's regulatory acceptance of our tried and tested reactor technology, it shows real momentum behind the project which will bring huge benefits everywhere from Anglesey to Wales and the UK and Japan. Our focus now is to ensure we continue to deliver on our key project milestones as we move towards construction."
(LM/MH)
