Google is to open a multimillion-pound "technology community centre" in London's East End, as part of the government's plans to create a Tech City in the capital.

The seven-floor building will act as a shared space for the growing cluster of internet companies based in the heart of London's so-called "Silicon Roundabout", the internet giant said.

The announcement comes just 48 hours after Twitter confirmed that it would open a major international office in Dublin instead of east London. The move was seen as a huge blow to David Cameron's Tech City vision.

The prime minister revealed the plans to create a rival to Silicon Valley in November last year, backed by £400m in government funding and with support from technology firms including BT, Cisco, Facebook and Google.

Google said the Bonhill Street office would undergo refurbishment before it is opened to the public in 2012. The US-based company will have a presence in the office, a Google spokesman said, but the space will mainly be used as a training workshop for startups in the capital.

"We announced our involvement in the Tech City project last year, and we've been working hard to make this vision a reality," said the Google UK engineering director, David Singleton.

"Finding a suitable building is the first major step, and we hope to announce more details about the organisations we'll work with and how they will use the space in the coming months. East London is already home to hundreds of innovative British startups and has huge potential for economic growth and new jobs over the coming years."

One of the organisations thought likely to have a presence in the new building is TechHub, the Old Street office for fledgling internet firms that opened in July last year. Google was one of the founding partners of TechHub, alongside Telefonica's developer programme Blue Via and publisher Pearson.

Elizabeth Varley, co-founder of TechHub, said it was "great to see companies [that are] talking about supporting Tech City actually moving ahead and doing it in a real way". She added Twitter's decision not to open an office in east London was not a huge blow for the area, saying that the social network "is not the be-all-and-end-all of the London startup scene".

The chancellor, George Osborne, said the move showed the Britain "is open for high-tech business". He added: "Google's multimillion-pound investment in London's Tech City is great news.

"It shows that we can create the right environment to attract startups and established high-technology businesses, supporting our programme to create new jobs, diversify the economy and create long-term economic growth. This shows that Britain is open for high-tech business."