Business Secretary Lord Mandelson said the move would help propel Sheffield Forgemasters to the forefront of world markets.
He said the decision to offer support to the company was part of a strategic intervention to develop the nuclear supply chain able to meet the demand of the next generation of nuclear power stations to be built in the UK and to compete for orders worldwide.
The loan offer, together with participation in the project from nuclear power firm Westinghouse, will enable Sheffield Forgemasters to build a major manufacturing facility for ultra heavy forgings for civil nuclear power and other markets.
The company will become only the second in the world with necessary nuclear accreditation able to make the largest forgings required to make the critical components required for the global civil nuclear industry.
Lord Mandelson, who is visiting the company today, said: "This is not just help for one company. Today we're announcing a willingness to invest that will make the UK a leading provider in the nuclear and the low carbon supply chain.
"Our high value manufacturing, knowledge base and highly skilled workforce mean with the right investment, like today's, the UK can win a huge amount of business in this growth sector.
"This is Government and industry working together to build the success of British manufacturing. This will help to realise the potential of our industrial base to be world leading, export led, and creating jobs and value here at home."
Currently the UK is able to supply around 50% of the plant and equipment for a new nuclear programme in the UK but with investment this could increase to 70%, the Government said.
Business minister Pat McFadden added: "We are a country that believes in making things and this investment could be very important for manufacturing in the UK.
"It will place Britain in a much stronger position to develop the nuclear supply chain which has benefits not just in the UK market but potentially in exports too as many countries build more nuclear power stations in the years to come. It is a strategic investment to help Britain build a lower carbon manufacturing economy."
The Government today also committed to co-fund the delivery of up to 1,000 apprenticeships a year in the nuclear energy sector.
Energy and Climate Change Secretary Ed Miliband said: "Moving to a low carbon economy is crucial to tackling climate change and ensuring our energy security, and it's a transition that provides opportunities to boost jobs, skills and investment in Britain.
"The support we are providing for Sheffield Forgemasters, and our commitment to boosting apprenticeships in nuclear, show our determination to support the industries of the future."
The offer announced today will enable Sheffield Forgemasters to build a 15,000 tonne press and finishing facility which can produce the ultra-large forgings such as reactor pressure vessels that are integral to modern civil nuclear reactors.
Currently these can only be produced in Japan for the global market. This will create around 180 direct skilled jobs in the long term and many more during the construction phase.
Michael Macdonald of the Prospect union welcomed the news, adding: "This deal, in which Westinghouse Electric is also investing, adds a new and vital link to the UK nuclear supply chain. It will help pave the way for three generations' worth of high-quality new jobs at each site where new nuclear build is planned.
"Not only is it great news for local job security, but workers at Sheffield Forgemasters will be making a vital product to support new nuclear build in the UK, as well as the global market. This deal provides yet more evidence that new build will bring jobs into the UK supply chain."
Speaking alongside Lord Mandelson at today's launch in Sheffield, Mike Tynan, chief executive of Westinghouse UK, said: "Today's announcement is yet another tangible indicator that new nuclear build is becoming a reality for the UK and around the world.
" Westinghouse has long operated a 'We Buy Where We Build' approach, and this news serves as further evidence of our confidence in the UK supply chain and commitment to build here.
"I hope it will send a strong signal to other UK companies who may be considering the wide range of opportunities offered by the nuclear industry."
TUC general secretary Brendan Barber said: "This announcement is great news for jobs, the fight against climate change and the future of the UK economy.
"This is a vindication of the Government's proactive industrial strategy and shows that carefully considered state action can play a key role in persuading investors that the UK is serious about growing the businesses of the future."
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