The Bank of England (BoE) announced that the 'Pride and Prejudice' author will replace Charles Darwin.
"Jane Austen certainly merits a place in the select group of historical figures to appear on our banknotes," said Mark Carney, the new Governor of the Bank of England.
"Her novels have an enduring and universal appeal and she is recognised as one of the greatest writers in English literature. As Austen joins Adam Smith, Boulton and Watt, and in future, Churchill, our notes will celebrate a diverse range of individuals who have contributed in a wide range of fields," he added.
In April, the BoE had prompted a high-profile campaign against the prospect of having no female characters, besides the Queen, on the UK's currency after it announced that Britain's war-time Prime Minister, Sir Winston Churchill, would be put on the 5 note pound from 2016 - replacing social reformer Elizabeth Fry.
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The new note will display an image of Austen based on a drawing by her sister Cassandra Austen, and a quotation from 'Pride and Prejudice': "I declare after all there is no enjoyment like reading!"
Austen, who lived from 1775 to 1817, became one of the country's most celebrated novelists.
She began to write as a teenager and her first novel, 'Sense and Sensibility', appeared in 1811.
She described her second novel, 'Pride and Prejudice', as her "own darling child".
Her other published novels were 'Mansfield Park', 'Emma', 'Persuasion' and 'Northanger Abbey' - the final two of which were published after her death.