The museum will be in the former dock traffic office

National Museums Liverpool said it followed the success of the Transatlantic Slavery Gallery at the Merseyside Maritime Museum.

The �10m project will centre on the former dock traffic office.

Liverpool was regarded as the principal slave port in Europe by the 1740s and the trade contributed much of the city's wealth during the 18th Century.

A museum spokesman said it was hoped phase one would finish by 2007, the 200th anniversary of the abolition of Britain's slave trade.

The museum will feature dynamic displays about the story of the transatlantic slave trade.

It will demonstrate that this is a grown up city, able to address uncomfortable and disturbing truths about its past David Fleming Director of National Museums Liverpool

It will look at the legacy of transatlantic slavery and cover topics such as freedom, identity, human rights, reparations, racial discrimination and cultural change.

Phase two - due to open in 2009 - will see the development of an area for performance, public lectures and debate.

David Fleming, Director of National Museums Liverpool, said: "It is important that this new national museum is in this city, and that the story of Liverpool's crucial role in the transatlantic slave trade is told well.

"It will demonstrate that this is a grown up city, able to address uncomfortable and disturbing truths about its past, even as we celebrate Liverpool's status as a European Capital of Culture."