A £7 million fund will be used to examine the potential for a future Olympics bid by northern England.
Chancellor John Healey will use his Budget on Wednesday to announce a full feasibility study for a Northern Games.
Prime Minister Andy Burnham said an Olympics bid would be “something everyone can get behind”.
In May, before Mr Burnham entered No 10, the Government commissioned an assessment by UK Sport which could inform a bid for the international sporting event in the 2040s.
Having cleared that hurdle, Mr Burnham’s government has announced £7 million for a full assessment of a future Olympic and Paralympic bid and a commitment to support UK sport.
The Prime Minister said: “Few things bring a country together quite like the Olympics. I want people to feel that sense of excitement again, and to experience it in their own towns and communities, not just watch it on the telly.
“The games would unlock opportunity across our towns and cities for the whole country. From north to south, it would be something everyone could get behind and be proud of.
“We know we can put on the greatest show on earth. Now we want to explore how we can do it again, with the whole country behind it.”
The full feasibility study will look in greater detail at how the games would work in practice, including types of venues and transport links needed and the prospects of developing a winning bid.
The work will involve the Government, UK Sport, the Northern mayors and the British Olympic and Paralympic Associations, who would ultimately be responsible for a bid.
Mr Healey said: “The North hosting an event as big as this would be truly unforgettable.
“Britain’s experience of London 2012 is proof we can host the world. I’m picking up the pace on our work to potentially bid for these prestigious games.
“It will lift communities, create opportunities and give the UK a huge boost.”