Britain will join a consortium of 13 European countries and Brazil involved in building the European Extremely Large Telescope.
Britain is to play a leading role in building the world's biggest telescope after George Osborne agreed government funding for the £900m project.
Osborne has agreed to put £88m into the European Extremely Large Telescope, which will be built around a 128ft-wide mirror, roughly half the length of a football pitch.
The telescope will be capable of spotting planets that could support life in other parts of the galaxy, and of detecting light from the universe's first stars. The equipment will provide images 16 times sharper than those of the Hubble space telescope.
Osborne was said to have been convinced of the plan's merits by David Willets, the science minister, both because of the money that will be spent in Britain, and due to the project's vast scope.
A key task will be to detect the ashes and radiation left over from the first generation of stars, which formed more than 13 billion years ago, and are believed to have been far larger than those existing today.
Another task will lie in identifying Earth-like planets that orbit in the more habitable zones of distant stars. The telescope will be able to analyse the light passing through their atmospheres to look for molecules such as ozone, which could potentially support life.
"If this project succeeds in imaging the first stars or finding a life-bearing planet, it will be one of the achievements of this coalition government," said Willets.
The E-ELT will be built by a consortium of Britain, Brazil and 13 European countries. It will be built on the Cerro Armazones mountain range in Chile's Atacama desert.
However, Willets said he would press for the telescope's giant reflector to be built at Glyndwr University in Wrexham.
"Most of the money we spend will be used to support British science and engineering," said Willets.
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