Work has started on the next stage of the Midland Metro, which will link two of Birmingham's main railway stations.
Transport minister Norman Baker was there to see work start on the extension of the Midland Metro.
Underground pipes and cables will be re-positioned to make way for new tracks.
The £127 million scheme will also involve an upgrade to the depot at Wednesbury and 20 new trams will link Snow Hill station to the redeveloped New Street station in the city.
Work will be completed by 2015.
The Transport minster, Norman Baker, started the work on Birmingham's tram extension and said: "We're investing record amounts in transport and there is clear evidence there's a big return on that money in terms of business and the help to the economy, particularly this project in Birmingham."