Around 15,000 free “green parking permit” spaces will be available for low-emission vehicles as part of the town's Go Ultra Low City initiative.
The Government’s scheme is designed to encourage the use of electric vehicles, with bus lanes also opened up to the cars.
In January, Milton Keynes was awarded Go Ultra Low City status alongside Bristol, London and Nottingham, and was awarded £9 million to tackle harmful emissions and reduce its carbon footprint.
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The Government is investing £600 million in cleaner, greener vehicles by 2020 to improve air quality and create jobs. It is hoped that every car and van in the UK will be zero emission by 2050.
Dundee, Newcastle, York and Oxford have also received funding for specific Go Ultra Low projects.
They each received a share of £40 million worth of funding by proposing innovative ideas that will encourage drivers to choose an electric car.
At the launch of the parking spaces, Transport Minister Andrew Jones said: “It is great to see the first part of Milton Keynes’ Go Ultra Low City plan become a reality.
“Thanks to the £9 million of funding we have provided, thousands of local residents will now be able to park their electric cars for free. This grant will also help to create an ‘electric vehicle experience centre’ in the city and open up bus lanes to electric car drivers.”
Sales of electric cars have soared in recent years, with more than 115 plug-in motors registered every day in the first quarter of this year alone.
In total, 10,496 electric vehicles hit the roads in the first three months of 2016, including motors such as the Nissan Leaf, Toyota Prius Plug-in and Mitsubishi Outlander PHEV.
Motorists in the UK now buy an electric car every 13 minutes – and these vehicles could outsell petrol and diesel models in the next decade.