The arena will house full size pitches for multiple sports including rugby, soccer and Gaelic games.
It will also host community and musical events, the university said.
Professor Cathy Gormley-Heenan, UU’s provost, said it was exciting to be able to take the project forward.
“This facility will be quite literally game-changing in terms of enhancing sporting and community facilities in the city and we are delighted to be expanding our offering for both our students and our neighbours in Derry-Londonderry,” Prof Gormley-Heenan said.
Funding from the EU’s Peace Plus initiative was announced earlier this week, it stands at €10.86m (£9.05m).
UU said it would match the funding from the initiative.
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