Plastic banknotes will be issued for the first time by the Bank of England when a new £5 note featuring Sir Winston Churchill appears in 2016.
The BoE explained the next £5 and £10 banknotes will be printed on polymer, a thin flexible plastic film, rather than on the cotton paper used for notes currently in issue.
The new polymer notes will retain the familiar look of BoE banknotes, including the portrait of Her Majesty the Queen and a historical character.
The £5 Churchill banknote in 2016 will be followed around a year later by a polymer £10 note featuring Jane Austen, according to the BoE
"Polymer notes are the next step in the evolution of banknote design to meet that objective," said Mark Carney, governor of the BoE.
He added: "The quality of polymer notes is higher, they are more secure from counterfeiting, and they can be produced at lower cost to the taxpayer and the environment."
The decision follows a three-year research programme by the BoE looking at the materials on which banknotes are printed, and which concluded that there were compelling reasons to move to printing on polymer.
In particular, the research indicated that polymer banknotes are more durable.
The BoE said they last at least 2.5 times longer than paper banknotes so will take much longer to become "tatty", improving the quality of banknotes in circulation.
In addition, polymer banknotes are more environmentally friendly.
The BoE ran a public consultation which was "overwhelmingly supportive" of polymer notes.
For instance, nearly 13,000 people gave feedback during the public consultation programme and a vast majority (87%) of those who responded were in favour of polymer - only 6% were opposed and 7% were neutral.
"We know that the public care greatly about their banknotes and the feedback we received provided an invaluable input into our final decision," said Chris Salmon, executive director for banking services and chief cashier at the BoE.
The new polymer notes will be slightly smaller than their existing paper equivalents, but the current practice of note size increasing with note denomination will be maintained.
The contract for printing the BoE's notes from April 2015 is currently being tendered.
Notes will continue to be printed at the BoE's printing works in Debden, Essex.