Londonderry will battle it out against Birmingham, Norwich and Sheffield in a bid to become the UK's first City of Culture in 2013.
Culture Minister Margaret Hodge revealed the line-up after bids from 14 long-listed cities were scrutinised by an independent judging panel.
The successful city will hold the inaugural title in 2013.
Derry City Council Mayor Paul Fleming said it was a significant step forward.
"This is a great statement of confidence in the city's cultural wealth and an endorsement of the commitment and effort so far.
"We look forward to building partnerships to progress through to the final stage," he added.
2013 will mark the 400th anniversary of the Plantation of Ulster and the building of the Walled City of Derry.
Each year the city attracts more than 600,000 visitors to cultural venues, generating over £11m.
Foyle SDLP MP Mark Durkan said of Londonderry's success: "The bid has brought out the best, not only of what our city has to offer, but how our city and region can work together in common cause.
"This city and region have a rich history and cultural offering which this effort is bringing to a whole new audience.
"The programmes and partnerships that have been ignited and developed are a tempting taster of what will be in store should we succeed in winning the competition outright."
Chief executive of Ilex urban regeneration company Aideen McGinley said:"We're in this to win.
"The energy and commitment galvanised by the bid process to date will now re-double in the final push to bring together in a compelling way our cultural champions, venues, organisations and artists to showcase the unique talents of the city and region."
The panel will make its final recommendation on the winning bid in the summer, after it re-examines the bids again in June.
Among the locations which have been rejected were Swansea, Southend and Durham.
The scheme was set up in the wake of the success of Liverpool's tenure as European Capital of Culture in 2008.
Being crowned capital of culture is expected to provide a multimillion-pound boost to the successful location.
© Press Association