Plastic banknotes are to be issued for the first time when the new £5 featuring Sir Winston Churchill appears in 2016.
A £10 note featuring Jane Austen to follow around a year later will also be made from polymer rather than the cotton paper currently used, the Bank of England said.
It follows a three-year research programme that concluded plastic notes stay cleaner for longer, are more difficult to counterfeit and are at least 2.5 times longer-lasting.
A public consultation, giving people the chance to handle the notes, found 87% of 13,000 individuals who responded were in favour of polymer.
Bank governor Mark Carney said: "Ensuring trust and confidence in money is at the heart of what central banks do. Polymer notes are the next step in the evolution of bank note design to meet that objective.
"The quality of polymer notes is higher, they are more secure from counterfeiting, and they can be produced at a lower cost to the taxpayer and the environment."
The new notes will stay cleaner and last longer than cotton paperThe new notes will retain their familiar look, the Bank said, including the portrait of the Queen and a historical character.
A contract is expected to be signed with Innovia Security to supply polymer material, which would see Innovia establish a polymer production plant in Wigton, Cumbria.
The Bank acknowledged when it launched its consultation in September that plastic banknotes were more expensive to produce.
But it argued that because they are longer-lasting they should prove cheaper in the long run.
It also says that, being thin and flexible, they can fit into wallets as easily as paper banknotes.
The Bank said the new notes would be slightly smaller than existing paper notes, but the practice of note size increasing with denomination will be maintained.
More than 25 countries issue polymer banknotes, including Australia - which began printing them in 1988 - as well as New Zealand, Mexico, Singapore, Canada, and most recently Fiji and Mauritius.
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