The minister said the agency's role in sports development is vital

Sports Minister Patricia Ferguson said she understood the concerns of the 133 staff affected but claimed it was the "right move" for sportscotland.

Its headquarters will be sited within a new National Indoor Sports Arena being built in the city's east end.

The Scottish National Party warned that the cost of relocating must not result in money being diverted from sport.

The move from the current base at Caledonia House follows an appraisal which found that relocation would offer better value for money.

Ms Ferguson insisted the move would allow sportscotland to develop and influence the future of sport.

She said: "It is good news for the east end of Glasgow - an area with pressing social and economic needs.

We have to protect the funding that is meant to be for sport and make sure it is not chewed up in the bureaucracy of this quango Michael Matheson SNP MSP

"It is important that our national sports agency plays a central role in preparations for the London Olympics in 2012 and helps Glasgow secure the 2014 Commonwealth Games."

Chair of sportscotland Julia Bracewell said that now the decision had been made, it provided a once-in-a-lifetime opportunity to change the face of Scottish sport.

However, the SNP raised concerns over the upheaval and value for money.

SNP MSP Michael Matheson said: "We have to protect the funding that is meant to be for sport and make sure it is not chewed up in the bureaucracy of this quango.

"The Labour and Lib Dem executive must provide clear assurances that sportscotland's funding is invested in areas such as providing sporting opportunities within local communities."

The new arena will be situated in Glasgow's east end

Mr Matheson also claimed it was probably "the longest delayed announcement in Scottish political history" and he accused the minister of a lack of leadership.

The decision was welcomed in Glasgow where Stephen Purcell, leader of Glasgow City Council, described it as a "great coup".

Glasgow Chamber of Commerce chief executive Dr Lesley Sawers said it would provide a substantial economic boost for the east end.

Derek Casey, Director of the Glasgow 2014 Bid Team, said the decision demonstrated a "vital commitment" to Scotland's bid.

It is understood that the relocation will take place in 2009.