The submarine, the HMS Audacious, will be the fourth of seven such vessels in the British navy submarine fleet.
"This 1.2 billion pound ($1.9 billion) contract marks an important step forward in the progress of the Astute program and moves the Royal Navy closer to adding more of these highly advanced and powerful attack submarines to its fleet," said British Defense Secretary Philip Hammond.
"I am also pleased to announce today that the (Ministry of Defense) is committing more than 1.5 billion pounds ($2.40 billion) for boats five, six and seven."
The nuclear-powered combat submarine is 323 feet long, has a submerged speed of 29 knots and is armed with torpedoes and cruise missiles.
The first Astute class submarine was commissioned by the British navy in 2010.
"These submarines represent a huge leap forward in technology and will operate all over the world with the Royal Navy," said Rear Adm. Simon Lister, the Defense Ministry's director of submarines. "These boats provide the optimum capability a submarine can offer in land strike, strategic intelligence-gathering, anti-submarine and surface ship warfare and protection of the strategic deterrent."