The 269-turbine development, upon completion, could power up to 175,000 homes as well as provide support for more than 100 jobs in the north of Scotland.
The MeyGen scheme has secured £51m in funding, of which £20.5m is being provided by the Scottish Government's Renewable Energy Investment Fund (REIF). The Highlands and Islands Enterprise is also providing funding.
Energy Minister Fergus Ewing said: "The funding announced today will help bring to life innovative and exciting plans to develop the world’s largest tidal power project in Scotland.
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"Our ambition for Scotland's emerging wave and tidal sectors remains great. The Pentland Firth development takes our ambition to the next level and further cements Scotland's reputation as a world leader in deploying renewables technology.
"We know that the successful harnessing of ocean power takes hard work and persistence which is why we are determined to support those in the industry.
"By developing clean, green energy we are creating opportunities for communities in the north of Scotland and delivering jobs and investment."
Calum Davidson, HIE's Director of Energy and Low Carbon, added: "The MeyGen project is the first commercial scale tidalstream array to be developed and built out. HIE is delighted by today's announcement as it gives a strong green light to the start of the construction phase of the project.
"It is a huge boost to the Highlands and Islands which is being rightly recognised as a global centre for marine renewables. We have world class wave and tidal conditions here, as well as expertise across the engineering and marine supply chain supported by a skilled and dedicated workforce."
(JP/MH)
