Defence Housing Australia will move its head office, and its 290 Canberra-based staff, to Gungahlin.
A new office will be built to house the agency, with a move in date and cost of the project still to be determined.
The agency's head office is currently in Barton, with some staff also located in Dickson. Liberal ACT senator Zed Seselja said he was pleased to make the announcement after the government had promised to move an agency to Gungahlin in the lead up to the 2016 election.
"I have been fighting for the town centres in Canberra. I fought for the Department of Social Services to remain in Tuggeranong with a new building, for the Department of Immigration and Border Protection to remain in Belconnen and now, we have the first major move of Commonwealth agency to Gungahlin,” Senator Seselja said.
The agency was chosen because of its size, the expiry date of its current leases and the number of its clients already in the Gungahlin area.
The Department of Finance will coordinate the process of finding an appropriate site and starting construction, Senator Seselja said.
Senator Seselja said that he hoped that the number of Commonwealth agencies based in Gungahlin would grow to a size similar to departments in Tuggeranong and Belconnen, where thousands of staff are based.
"Obviously we want to see this grow over time and I hope that it wont be the last Commonwealth agency to come here," he said.
Asked if Defence Housing staff had been consulted about the move, Senator Seselja said the Department of Finance had been driving the move.
"There's obviously discussions that go on, I haven't been in the detail of all those discussions."
The 2016 census found that Gungahlin was the second-fastest growing area in the country, and vice president of the Gungahlin Community Council Henley Samuel said there are 26,000 households.
The Community Council had been discussing the possibility of moving an agency to Gungahlin for three years, and hoped to continue to stay involved, Mr Samuel said.
"We will keep looking and see when it will be done," he said.
The announcement comes after last week's federal budget included plans for just six government agencies to be moved out of the national capital. Despite a campaign from the former deputy prime minister Barnaby Joyce to move more government jobs to regional areas, three of the agencies will be moving to other state capital cities.
The ACT government has welcomed the announcement and labelled it a vote of confidence in the light rail network.
"Local businesses will benefit from the moving of 290 staff from Barton to Gungahlin, with staff able to access the new office via Canberra’s light rail network," Chief Minister Andrew Barr said in a statement.