Tyne & Wear Passenger Transport Executive Nexus is to take over the running of the Tyne & Wear Metro from April 2017.
The current contract with operator DB Regio runs until March 2017 and Nexus has opted not to exercise its right to extend the arrangement by a further two years.
Nexus, which sets fares, owns and maintains the infrastructure, now seeks the endorsement of Leaders of the North East Combined Authority to directly assume the management of operations.
A new contract will begin in 2019 incorporating the delivery of a new train fleet in the early-2020s.
Tobyn Hughes, Managing Director of Nexus, said: “The future of the Tyne & Wear Metro holds a major investment in a new fleet of trains and we need to prepare the business for that.
“The current contract that expires in March 2017 is not delivering the outcomes for passengers that either we or the operator wants to see.
“Managing Metro directly for a limited period will allow Nexus to prepare the Metro business for the significant change that will come with further investment of more than £400 million in a new train fleet in the coming years.”