Universities in the Austrian capital are to get a €1.3 million (£890,000) a year tax windfall to help fund research and development.
The money will come in the form of a rebate from the property taxes that the universities have to pay every year to the Federal Real Estate Company, a state-owned group.
The money used to be passed on to the city, but the city decided to pay the money back to the universities through a special fund for research and development.
Universities in Vienna used to pay about €57,000 a year in property taxes, but this figure shot up to €1.3 million annually since the buildings were bought by the Real Estate Company for €2.4 billion in 2001 as part of government efforts to save money by outsourcing property.
Sepp Rieder, Vienna's finance councillor, said: "We want to see this money flow back into the universities through research, art projects, training and development. Vienna is the first city in Austria to refund taxes in this way. We have decided to do this because we do not want to increase the city's coffers at the expense of the universities and at the expense of Vienna as a centre for science and research."
Andreas Mailath-Pokorny, the city's science councillor, who signed the agreement with Dr Rieder and Christoph Badelt, president of the Austrian Rectors' Conference, added: "The city invests about €150 million a year in science and research. The new fund will strengthen this and is a sign of the co-operation between Vienna and its nine universities."
Vienna is the second largest university centre in the German-speaking world after Berlin, with more than 120,000 students and 800 research facilities.
Professor Badelt said: "I am pleased that Vienna is taking a leading role in this matter and hope that other university towns in the country will follow suit."