Plans for a major new centre for the contemporary arts, the first of its kind in the north of Scotland, have been approved by the Scottish Government.

The £12.5m development in Aberdeen's sunken Victorian Union Terrace Gardens is expected to be completed by 2010. The project is being led by Peacock Visual Arts and it is expected the centre will attract more than 200,000 visitors a year to the North East and bring £4m annually to the local economy.

It will host activities spanning the contemporary arts and house galleries, printmaking, television and dance studios, workshops and an education suite.

It aims to be an international centre of excellence for participation and education in the contemporary arts as well as a North East home for the creative industries.

It will be home not only to Peacock Visual Arts but Aberdeen City Council's Arts Development and Arts Education Teams and will provide citymoves, the North East's contemporary dance agency with new facilities.

The plans, which have been described as "visionary" and "iconic" have been praised by Architecture and Design Scotland for both the unique design and the collaborative approach taken by Peacock Visual Arts and the council.

The plans were unanimously approved by Aberdeen City Council last year and have received wide public backing but they did draw objections from the Architectural Heritage Society of Scotland and Aberdeen Civic Society.

Lindsay Gordon, director of Peacock, said: "As soon as Brisac Gonzalez the architects unveiled the plans we knew this development would bring something very special to the cultural and architectural landscape of the UK. What we have here is a stunning building that will put Aberdeen on a par with other Northern European cultural centres such as Helsinki, Oslo and Copenhagen."

Kate Dean, leader of Aberdeen City Council, said: "Bringing high-quality architecture to Aberdeen is a key part of our vision for city centre redevelopment.

"We are pleased that the Scottish Ministers have recognised this by approving Brisac Gonzalez's beautiful design. What we're creating is an iconic building for the city that will not only be used by all of our communities but attract people from outside the area."

A detailed model of the plans will be on display to the public in the City Council's St Nicholas House headquarters for the next month.