Announcing that funding is now in place for the long-delayed scheme, Prime Minister Gordon Brown said it was a project of "enormous importance, not just for London but for the whole country".
He said the scheme would generate an additional 30,000 jobs and construction for the link - which will run from Maidenhead as far east as Essex - will begin in 2010.
Crossrail was first given the go-ahead by the Conservative government in 1990 but mounting costs caused the project to be put on hold in the mid-1990s before it was revived in recent years.
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The government is providing a third of the money, and the rest will be made up from borrowing against future fares and a levy on London business rates.
London mayor Ken Livingstone said: "It is a tremendous, £16 billion, internationally-recognisable vote of confidence by businesses and government in London's economic success.
"In the seven years since I have been mayor, delivering Crossrail has been by far the most important transport project I have sought to deliver, working together with London's businesses and the Government, and I regard [this] statement as a tremendous combined achievement of all those who have worked for it and one of the most important announcements London could have.
"Crossrail is not just a transport scheme - it is the key to the next 20 years of economic development of London."
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