The network will serve the council's estate, including 67 schools, 14 libraries, accommodation and council offices and sports facilities, and will provide the bandwidth for new services.
Roy Grant, head of ICT at York Council, said earlier costs and bandwidth limitations and made it impossible to deliver such services.
"But with the new dark fibre network those restrictions are removed. Not only will we be able to link-up existing council buildings and facilities, including our new headquarters which will available for occupation in 2012, but we may also be able to attract new businesses to York by offering them low-cost connectivity to the network," he said.
Grant said the new network will exceed upcoming government guidelines for school connectivity and will support around 24,000 local pupils.
H2O Networks has begun building the dark fibre network around the city. It will provide city-wide access speeds up to 10Gbps by September. This will allow the delivery of core services such as IP telephony and council applications, as well as video conferencing, CCTV and urban traffic management services.
H2O Networks MD Roy Shelton said the live network would help the city council improve citizens' access to council services and facilities over the internet.
"In addition, other third-party business users and consumers will be able to access services provided by and through the network - the obvious example is visitors and tourists to the city," he said.
Shelton suggested the new network could also support a wireless access network to allow users to download audio guides to the many tourist attractions throughout the city. "The opportunities the new network will provide are limitless," he said.