The UK Defence Secretary Sir Michael Fallon announced the signing of the contract, which is worth around £3.7 billion ($6.3 billion).
Manufacture of the first three warships will secure approximately 1,700 skilled shipbuilding jobs in Scotland and 1,700 jobs throughout the supply chain across Britain until 2035.
Sir Michael said the warships will significantly enhance the Royal Navy's capabilities, and that they will cut steel on the first ship later this month.
"The Type 26 frigate is a cutting-edge warship, combining the expertise of the British shipbuilding industry with the excellence of the Royal Navy," he said.
"We will cut steel on the first ship later this month – a hugely significant milestone that delivers on our commitment to maintain our global naval power. These ships will be a force to be reckoned with, there to protect our powerful new carriers and helping keep British interests safe across the world."
The Type 26 frigates are one of the three designs shortlisted for Australia's Future Frigates SEA 5000 program.
BAE Systems Australia chief executive Glynn Phillips said the signing of the UK contract is important for Australia and should provide the government and Royal Australian Navy with confidence in the company's bid.
"This news is very exciting for Australia as it’s a turning point for the Type 26 Global Combat Ship program. With construction starting in the coming weeks, the most modern, most capable, most future-proof anti-submarine warfare platform in the world will soon become a reality," said Phillips.
"This milestone means the Royal Australian Navy should have full confidence that our offer for SEA 5000 – the Global Combat Ship-Australia – will have the largest growth margins of any ASW frigate in the world and will remain at the leading edge of naval technology throughout its service life.
"The potential for concurrent production in Glasgow and Osborne also means the Commonwealth stands to receive full knowledge sharing from a live program through BAE Systems’ best-practice exchange, significantly de-risking SEA 5000."
The Future Frigate Program will replace Australia’s existing fleet of eight Anzac Class frigates with a new fleet of nine ASW frigates.
BAE Systems, Fincantieri and Navantia are the three tenderers competing for the $35 billion contract.
Gate Two government approval is expected in 2018, to allow construction to commence in Adelaide in 2020.