The Toronto Transit Commission has officially signed its $1.2-billion contract with Montreal-based Bombardier (TSX:BBD.B) for 204 new low-floor streetcars.

The deal, first announced in April and signed Tuesday, calls for delivery of a prototype vehicle by 2011, with passenger service on the first of the new streetcars to begin in 2012, the TTC said in a statement.

All 204 cars are to be delivered by 2018.

Bombardier said it was the largest single order for light rail vehicles in the world to date.

The new streetcars will replace the current fleet of 248 streetcars purchased in the 1970s and 1980s.

Among other things, the new streetcars will be low-floor, quieter and come with air conditioning, and be able to carry almost twice as many people as the current models.

Previously, the purchase of the streetcars to be built in Thunder Bay, Ont., had been contingent on securing a one-third share of the price from Ottawa.

However, federal Transport Minister John Baird rejected the bid as presented, saying the streetcar project did not qualify for federal stimulus cash.

Toronto city council then approved a revised plan last week to replace Ottawa's share by deferring some capital spending projects until 2018.