The money, which is being invested over a seven year period, is expected to create up to 115,000 jobs in the aerospace industry and its supply chain.
It will also be used to create a state of the art technology institute aimed at developing quieter and more energy efficient aircraft.
Making the announcement during a visit to Airbus in Filton, Bristol, Deputy Prime Minister Nick Clegg said: "Aerospace experts with highly specialised skills are working hard to make sure the UK remains Europe's number one aerospace manufacturer.
"We're doing all we can to maintain this jewel in our crown, which is why government is working hand in hand with industry to inject £2bn into a unique long term strategy to maintain Britain's position as the centre of aerospace technology.
"The UK's best technical experts can ensure we remain the world's preferred supplier and continue to build and design the planes of the future - lighter, quieter, faster and more fuel efficient."
Among the firms taking part in the Aerospace Technology Institute are Airbus, GKN Aerospace, Rolls-Royce, ADS, Messier-Dowty and AugustaWestland.
Philippa Oldham, head of transport and manufacturing at the Institution of Mechanical Engineers (IMechE), said in response to the investment: "The UK needs to be at the forefront of technologies like renewable and intelligent passenger aeroplanes, if it is to compete with countries like the US and China.
"Today's announcement shows commitment from the UK government to the country's manufacturing sector - a sector that is so critical to rebalancing our economy"
