City were granted planning permission in February to increase the size of arena from its current 47,670 capacity to 62,170.
The development, which will feature extensions to the north and south stands, has been split into two parts.
City have confirmed the appointment of international engineering company Laing O'Rourke as construction partners and ground engineering work on the South Stand site will begin immediately.
The expanded South Stand will take capacity to 54,000 by the 2015-16 season, something which will be marked by the introduction of a new £299 season ticket.
Tom Glick, City's chief commercial officer, said: "The expansion of the stadium is a hugely significant moment for City.
"We are delighted to announce Laing O'Rourke as a partner as we embark on this historic project.
"The waiting list for the expanded Etihad is already close to capacity and we look forward to seeing a sell-out 54,000-seat stadium as we open the 2015 season."
Laing O'Rourke were involved in the initial construction of the stadium, which was built for the 2002 Commonwealth Games.
The expansion is City's second major construction project in quick succession after the building of their new £200million Academy and training complex, which is due to open this summer.