Transport secretary Patrick McLoughlin granted permission under the Transport & Works Act for Chiltern to start work on the line.
Services will run between London Marylebone and Oxford from 2015.
This £130m project will bring Chiltern’s total investment in the line to £600m since the start of its franchise.
As part of the project, Chiltern Railways will build new stations in Bicester and in north Oxford. The new parkway station in north Oxford will be at Water Eaton and will be a multi-modal interchange, linking trains, buses, cars and bikes allowing passengers to avoid the congestion of central Oxford. Bicester Town station will also be redeveloped providing a gateway to the town next to the Bicester Village retail park.
The recently announced East West Rail project will also benefit from Chiltern’s new line from Oxford to London with both routes using the line between Oxford and Bicester. Chiltern Railways will now work in partnership with the East West Rail team to determine a joint project approach.
Chiltern Railways business development director Graham Cross said: “We are pleased to have been granted the power to proceed with this significant railway investment, which will benefit thousands of commuters and businesses in Oxfordshire and Buckinghamshire. The Oxford to London link is the latest in a long line of innovative Chiltern-led projects to upgrade the rail infrastructure, fuelled by our understanding of rail’s potential to make a significant contribution to economic growth and prosperity.”