The work, which will take trams to Chorlton, Oldham, Rochdale, MediaCity at Salford and Tameside, got underway on Great Ancoats Street in Manchester.
Concrete walls are being made to protect an underpass that trams will use on their way to Droylsden.
Transport bosses described the start of the work as 'a landmark day'.
Coun Matt Colledge said: "After months of preparations and groundwork, we're now beginning to actually see the new lines being built, which is very exciting.
"I am sure that the sight of this considerable piece of machinery at work will make people realise that Metrolink is coming their way."
The new four-mile line to Droylsden will run through east Manchester, past Eastlands and the Velodrome.
Work has also started to replace city centre tram lines - meaning Shudehill, Market Street, Piccadilly Gardens and Mosley Street stations are temporarily closed.
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Chapman (07/04/2009 at 11:27)
They are going to change the Oldham and Rochdale lines to a tram,why?
The next line will be to the new Media City at Salford quays when I bet the majority of people will drive there.
The promise was for the Metrolink to be open in time for the Commonwealth Games in 2002 which would run past SportCity to Ashton.Its 2009 now and the line will eventaully go to Drolysden 2012.Ten years late.
Instead they built a line out to Eccles.Did they hold the Commonwealth Games in Eccles or have I missed something?
If they were going to build a tram system they should have built it on dedicated track, using different routes, to the existing commuter train lines and it may have benefited areas without adequate transport links.As it is they are mainly substituting an inferior system.