The Bloomberg administration will pay $95.7 million for just shy of seven acres of land owned by developer Joseph Sitt.
The developer will keep the remaining five and a half acres of land to solicit a hotel and other retail.
The sale price -- more than $300 a square foot - is less than Sitt had demanded in the past, but considered a large amount in the current economic climate. Earlier this year, the city offered $110 million for 10.5 acres.
The long-delayed deal was key to the administration's plans to redevelop Coney Island, since Sitt's land sits at the heart of the seaside amusement district.
Sitt bought the land in 2005 with plans to build a Las Vegas-style entertainment mecca. The city balked at a condominium component, which would have provided Sitt guaranteed revenue.
Bloomberg wants to turn the storied neighborhood into a year-round destination with high-rise hotels, restaurants, retail stores, movie theaters and the city's first new roller coaster since the Cyclone was built in 1927.
At the heart of Coney Island were the Astroland rides, which sat on the acres the city will own.