The agreement is similar to the MTA's $1 billion deal with Tishman Speyer, which fell apart earlier this month.
Related Cos. and its financial partner Goldman Sachs have tentatively to take over the project.
Last week, Tishman Speyer Properties backed out of a deal that would have given the company a 99-year lease for the railyards on either side of 11th Avenue between 30th and 33rd streets, which are owned by the Metropolitan Transportation Authority.
The MTA will hold a special meeting Thursday to authorize the deal.
The railyards have been considered one of the city's best development opportunities, despite the $2 billion cost of constructing platforms to build over them.
The Related plan calls for 5.3 million square feet of residential space, 5.5 million square feet of office space, 1 million square feet of retail and hotel space, and a new public school.
Mayor Michael Bloomberg has pushed for years to transform a neighborhood dominated by warehouses and the Jacob Javits Convention Center into a business district resembling Rockefeller Center in Midtown, which Tishman Speyer owns.
"The decision by a joint venture of Related Companies and Goldman Sachs to invest in the redevelopment of the Hudson Yards demonstrates a renewed commitment to the future of the city and region," Gov. David Paterson said. "This agreement highlights the resilience of public-private partnerships in the face of the national economic downturn that we are experiencing."
Bloomberg said, "Despite the setbacks of the last few weeks, we are certain that Related and Goldman will realize this tremendous opportunity to develop what is really the only large parcel of undeveloped space left in Manhattan."
Sen. Charles Schumer said the MTA "deserves credit for moving this project along and not allowing it to fester." He added, "The fact that developers are willing to put money into this project shows that New York will certainly need more office space in the near future."
Ross, the chairman of Related, and Jeff Blau, the president of the company, said in a statement that they were proud to have been selected. "We have always believed that the West Side Yards present a unique development opportunity to shape the future of our city," they said.
