The massive cash allocation – part of a £5.25 billion pot handed to England from the European Regional Development Fund and the European Social Fund – was announced yesterday by Business Secretary Vince Cable.
The money – which will need to be match-funded, potentially raising the total investment to £1.2 billion – will be managed by the local enterprise partnerships (LEPs) under the new EU Growth Programme which will run from 2014 to 2020.
Cornwall, which is classed as one of the poorest regions in Europe, was handed £502 million, while the Heart of the South West LEP, which covers Devon and parts of Somerset, is to get £100 million.
Stephen Gilbert, Liberal Democrat MP for St Austell and Newquay, said: "I'm thrilled that Cornwall will be getting the lion's share of this round of European funding.
"It is no secret that Cornwall has lost out over many years when it comes to funding and having the highest allocation outside of London shows just how badly it is needed."
Mr Gilbert said it was "right" that the spending priorities would be decided by the county's local enterprise partnership but that it had to be invested "for the long term".
He added: "I hope it will build on the success of the Objective One and Convergence programmes and finally push Cornwall past having 75% of average European incomes so that we don't have to rely on European money any more."
While Cornwall may have been celebrating, Tim Jones, chairman of the Heart of the South West LEP, said they should have received "double" the amount they had been allocated.
"We are incredibly disappointed that the case to address the really difficult issues in some local economies, which are pulled up by the regional average, has been ignored," Mr Jones said.
"Some of the issues in North Devon and Torbay can only be addressed with the help of European grants, but the calculations on which this money has been divided have dealt us a very bad result."
The local enterprise partnerships (LEPs) have taken over the economic function of the former South West Regional Development Agency. They have already been pencilled in for tens of millions of pounds from the Government's Regional Growth Fund to create new jobs and wealth.
Further cash will be made available when allocations from the European Agricultural Fund for Rural Development are announced at a later date.
And the LEPs will be able to bid for a share of a £2 billion fund from 2015 – rising to £10 billion by the end of the five-year Parliament – which was announced by Chancellor George Osborne in his spending review on Wednesday.
In a written statement, Business Secretary Vince Cable said: "The Government has given a commitment that the Growth Programme Funds will be allocated to LEP areas as an important new source of finance to stimulate growth and jobs.
"This marks a significant shift from previous European programmes, which were substantially centralised, with limited local involvement in many key areas.
"LEPs and local partners will be in charge of European funds that will provide significant investment in innovation, business, skills and employment in a common agenda for growth and jobs that will integrate effectively with wider LEP strategic plans.
"The Government has set allocations that deliver the fairest split of funding across England, as far as EU rules allow."
Outside of England, the Highlands and Islands region of Scotland has been awarded £145 million, West Wales £1.44 billion and East Wales £306 million. All allocations are subject to confirmation of the 2014/20 budget by the European Parliament.