The Austrian capital prides itself on providing kindergartens for children with special needs and had wanted to build one in the City. But it has been persuaded to invest the money in a special-needs nursery that is due to open next year.
That nursery, which has a pounds 150,000 Corporation of London grant, will be in Islington, but 20 per cent of the places will go to City children.
It will be built at the Prior Weston primary school in Whitecross Street.
Vienna's donation will allow better security at the site, energy conservation measures, improved audio-visual and computer equipment, and better access from the nursery to the main school.