The company, which also owns Aberdeen and Glasgow airports, is to invest £40m on a major terminal extension that will increase capacity in the terminal, provide a new purpose built security screening area, and offer passengers a wider choice of shops, bars and restaurants.
The new security search area will have capacity for 14 x-ray machines, allowing the airport to handle up to 13m passengers a year.
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Around 200 jobs in the construction and retail sectors will be supported or created as a result of the development.
The £40m project is the first phase of a planned £100m investment over the next five years, and will be met entirely by BAA at no cost to the Scottish taxpayer.
Councillor Jenny Dawe, Leader of Edinburgh City Council said: "Edinburgh airport is the busiest in Scotland and this planned investment is vital for the future growth of the city and its long-term economic future."
Barbara Smith, Chair of Edinburgh Tourism Action Group (ETAG) said: "Edinburgh Airport is such a crucial part of Scottish tourism. It offers direct access to Edinburgh and everything that the city has to offer visitors around the world."
The 5,000 square metre extension has been designed by Archial Group and will be built by Balfour Beatty.
The ambitious development will take two years to complete because of the complexity of building in a live airside environment, with the project delivered in a phased basis in order to keep the main departure lounge open and ensure sufficient access to departure gates.
(GK/JM)
