The scheme will be built on land provided by Wiltshire Council and Persimmon Homes.
Westbury Partnerships, working with Sarsen Housing Association, will build the first 240 homes with construction beginning this month.
The first phase will be built in Trowbridge, Warminster, Westbury, Melksham and Hilperton, with the first properties ready to move into during summer 2012. They comprise mixture of one, two, three and four-bedroom houses, flats and bungalows.
Plans to build a further 100 homes will also progress following the backing.
The housing PFI allows local authorities to work with private sector partners to build, improve and manage housing.
It is administered in England by the Homes and Communities Agency (HCA), which has been working with the council in support of its bid.
This scheme is one of 13 that the government signalled continued support for, subject to a value for money review, in November 2010.
John Thomson, cabinet member for housing, said: 鈥淚 am really pleased the government has approved our business case to ensure these 350 much-needed affordable homes can be built, despite the difficult financial times.
鈥淚t is especially important during the economic downturn that we are able to provide enough good quality accommodation for Wiltshire's residents, and also bring much-needed jobs and commercial activities to the area.鈥�
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