Under the 99-year deal announced Friday, West Ham will make the short move from its 35,000-capacity Upton Park stadium to the revamped Olympic arena in 2016.
The 80,000-seat stadium, which also hosted the track and field competition at the 2012 London Games, will be downsized to 54,000 seats and reconfigured with a new roof and retractable seats.
"This is a truly momentous milestone for London's spectacular Olympic Stadium ensuring its credible and sustainable future," London mayor Boris Johnson said. "Through this deal with West Ham United FC, we are defying the gloomsters who predicted this landmark would become a dusty relic."
West Ham will have primary of use of the stadium, although the venue will retain the running track and stage other sporting events and concerts.
"It's had all the legendary moments from the summer in here," West Ham midfielder Joe Cole told The Associated Press. "We hope we can put more great nights on for the West Ham fans."
Britain hopes the stadium can be used for 2015 Rugby World Cup matches, a year before West Ham is expected to move in for the 2016-17 season. The stadium is also scheduled to host the World Championships in track and field in 2017.
West Ham was chosen as the preferred bidder after legal challenges from London clubs Tottenham and Leyton Orient.
With the new contract signed Friday—despite Orient pursuing another protest through the courts—West Ham officials criticized the previous policy of keeping soccer clubs out of stadium plans.
"It wasn't even foolhardy—it was a form of arrogance," West Ham co-owner David Gold said. "A child would know that the main issue after building the stadium for the Olympics is what is happening in the future.
"The only way athletics is going to enjoy any kind of success is that they've got to join another sport."
West Ham will pay only $22.7 million of the conversion costs, which are expected to exceed $227 million for the publicly-funded stadium. The club will pay an annual rent of around $3 million, which would be reduced if the club is dropped from the Premier League
The team will share revenue from any naming rights deal and match-day catering with the company in charge of securing a legacy for London's Olympic venues, which is headed by Johnson. West Ham will keep the cash from ticket sales.
The move to the stadium is expected to significantly raise the value of the club. If West Ham's owners sell in the next 10 years, they will have to give a portion of the sale to the legacy company.
Critics have questioned the fairness of West Ham's deal for a stadium built with public funds.
"West Ham are basically getting a stadium costing more than 600 million pounds for just 15 million pounds and a small amount in annual rent," former sports minister Richard Caborn said. "I do welcome the fact that the future of the stadium has finally been secured, but we should also realize that the public sector is picking up the tab."