A hotel currently under construction on Tentercroft Street has been bought by the City of Lincoln Council.
The council will invest £13 million in the building, which will be leased to Travelodge for 25 years.
After that time, the hotel firm will have the option to extend the lease for a further 25 years.
Councillor Ric Metcalfe, Leader of City of Lincoln Council, said: “People are looking to Lincoln more and more as a tourist destination and having a Travelodge in the heart of the city will help meet the demand of budget-conscious visitors.
“The superb location of the hotel will provide easy links to the new transport hub, the High Street and the University of Lincoln, making it an ideal place to stay for a trip to the city.
“The public has recently voted the city as having some of the best attractions in the country so this is a very exciting time for Lincoln. The new hotel will provide much needed jobs in the city to drive economic growth,” he said.
The building is set to have 127 bedrooms available to customers, in addition to a café and bar.
Work on the hotel is expected to be completed later this year.