The loan is a "done deal," LaHood announced in an appearance with Chicago Mayor Rahm Emanuel on the banks of the river, the Chicago Tribune reported Friday.
The six-block extension of the Riverwalk will include a center for learning about the river's ecology, a "zero-depth" fountain for children to play in, kayak rentals and a wooden boardwalk with floating gardens.
Emanuel said groundbreaking is scheduled for 2014, with completion expected by the end of 2016.
LaHood said the loan would be paid back over 35 years.
Some 70 percent of the revenue to repay the loan will come from higher fees two companies pay to dock boats on the river, said Chicago Transportation Commissioner Gabe Klein. The remainder of the revenue will come from advertising and leasing space to businesses that build along the river.
2014: The Year in Music [PHOTOS]