The new stands will give up to 18,000 spectators better facilities and will complement the existing stand, which opened in October 2009.
Environment Minister Alex Attwood agreed to planning permission for the ground improvements, which he said would be a "tremendous boost" for sport in Northern Ireland.
"I am satisfied that the new Ravenhill can be achieved without causing undue harm to the surrounding area or its citizens. Ulster Rugby will have a major role in this regard.
"The role of Planning is to create a better place, to live, work and invest in Northern Ireland and this ambitious exciting project will create employment opportunities for local people, particularly during the construction process.
"It is a further example of how sport in NI, which is very much on the up, can further develop," he said.
Sports Minister, Carál Ní Chuilín said the announcement is a "milestone in the upgrade at Ravenhill".
This progress will enable rugby to move to the next stage of their ambition to have a stadium that will fully meet their needs well into the future.
Sports Minister Carál Ní Chuilín
"Having secured up to £110million earlier in the year for the development of regional stadiums for rugby, Gaelic games and football, I am delighted that a point has been reached which will enable us to begin to see progress on the ground."
Ulster Rugby chief executive Shane Logan said: "A modern, fit-for-purpose and spectator-friendly stadium will enhance Ulster Rugby's standing and will assist the development of the sport from the grassroots through to international levels."
The construction work at Ravenhill will take a phased approach and the ground will continue to host matches with a slightly reduced capacity.
The development at Ravenhill will not only benefit our sport but will have wider benefits for health, tourism and the Northern Ireland economy and we are privileged to be part of a legacy that will remain in Northern Ireland for years to come.
Shane Logan, Ulster Rugby
"Over the coming months we will be working closely with our project board, consisting of representatives from Sport Northern Ireland and the Ulster Branch, which will oversee the project.
"We will be appointing an independent consulting team who will prepare the detailed design and the pre-construction process with an aim to start building towards the end of 2012," said Mr Logan.
The Chairman of the All Party Group on Rugby at Stormont, Alastair Ross MLA, said the redevelopment means Ravenhill will be "suitable to host some of the top competitions in Europe".
"There is no doubt that having top class facilities coupled with success on the pitch will help to expand the sport from grassroots right up to elite level, and I look forward to work beginning at Ravenhill before the end of the year," he added.
When completed, Ravenhill as the home of Ulster Rugby will be an up-to-date stadium that will be family-friendly and will meet safety and accessibility standards.
Having met with local residents and attended meetings at the grounds, I would be anxious that the concerns of the residents are taken on board by the association and resolved to everyone's satisfaction.
Alex Maskey MLA
Sinn Féin MLA for South Belfast Alex Maskey said the redevelopment was a great opportunity for the area.
"South Belfast will also benefit from the employment opportunities, especially in the construction industry and the overall economic benefits that will flow from this.