The University of Manchester and the University of Manchester Institute of Science and Technology (UMIST) will join forces from September 2004.

The new university, with about 34,000 students, will be the largest in the UK.

The deal has been agreed after the government and the North West Development Agency provided about �80m in funding.

The universities said the merger would provide "world class teaching and research", making it the equal of leading UK institutions and competing successfully with the best in the world.

We do see this as an expansion opportunity. This isn't a rationalisation exercise dressed up Professor Sir Martin Harris, University of Manchester

Professor Sir Martin Harris, vice chancellor at the University of Manchester, said: "Manchester is already one of the most popular student cities in the UK.

"What it will mean is a further range of opportunities and capacity.

"There will be combinations in the new university that neither UMIST or ourselves can currently offer.

"Combinations such as medicine and engineering, which are really part of the future, will be much, much easier to bring about."

He refused to rule out job cuts in departments which currently existed at both universities, including psychology and engineering.

But he added: "We do see this as an expansion opportunity. This isn't a rationalisation exercise dressed up."

The two universities had agreed in principle to the merger in October 2002, provided that sufficient external funding could be secured.