It follows a successful bid to part-fund construction of the Manchester Cancer Research Centre (MCRC) on the Christie Hospital site in Withington.
The £35m facility will work on developing personalised cancer treatments for thousands of patients across the UK.
A university spokesman said the announcement was a "fantastic boost".
Chris Cox, the university's director of development, said the research centre would translate discoveries made in the laboratory into new treatments.
He said it would house 150 additional researchers who will be developing new ideas and treatments.
Research will focus on radiation therapy, lung cancer, women's cancers, melanoma and haematological oncology.
The centre is the result of a partnership between The University of Manchester, The Christie NHS Foundation Trust and Cancer Research UK.
The Christie's chief executive Caroline Shaw said the funding would "help facilitate groundbreaking research right here in Manchester".
"The MCRC is a major step forward that will maximise our potential to benefit not just cancer patients on our doorstep but across the world."
The Christie treats more than 40,000 patients a year, with about a quarter of patients referred from other parts of the country for specialist treatment.
The announcement was made by the Higher Education Funding Council for England (HEFCE) and the Department for Business, Innovation and Skills to "progress cancer research development in Manchester."
David Willetts, Minister for Universities and Science said the centre "will address the key issues we face" in tackling cancer.
Revised plans for the research centre were given the go-ahead in March after a proposal for a multi-storey car park on the site was dropped.
The centre is scheduled to open in 2014.
Plans for a new cancer research centre in Manchester have received a £12.8m funding boost from the government.