The franchise covers routes across the West Midlands, as well as from London Euston to Crewe, and Liverpool to Birmingham.
London Midland, which has run the West Midlands franchise since 2007, was operated by Govia, a joint venture between Go-Ahead and Keolis.
"I believe this deal for the West Midlands will not only improve people's journeys but keep our economy growing and we look forward to working with West Midlands Trains in making that happen".
As part of the franchise deal, the Department for Transport (DFT) said that almost £1 billion would be invested in train services in the Midlands including 400 new carriages by 2021 and increased capacity on rush-hour services between Birmingham and London.
Alongside the announcement of the franchise was a commitment to inject £1bn into the network and implement a number of improvements including 20,000 extra seats for rush hour passengers in Birmingham, 100 new carriages on the Cross-City line and the roll-out of smart ticketing and live passenger information.
Chris Grayling, the transport secretary, said: "This is great news for passengers using West Midlands services - with new trains, more space, more regular services and easier access for disabled people".
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Abellio UK managing director Dominic Booth said: "We are delighted to have been announced as preferred bidder for the West Midlands franchise, driving growth in one of the most exciting regions in the country".
Managing director Patrick Verwer, said: "We have created a strong foundation for the new operators to build on".
"Having the ability to use our local knowledge and understanding to shape what West Midlands Trains will deliver for passengers under this franchise has also been a game-changer".
West Midlands Trains Ltd, a partnership between Abellio, East Japan Railway Company and Mitsui & Co Ltd, will run the new West Midlands rail franchise from December this year onwards, until March 2026. The West Midlands network of trains and infrastructure will be run by a local team.
The franchise also marks a step towards more devolution, because trains on local routes in the West Midlands will be jointly managed by the Department for Transport and West Midlands Rail, a consortium of 16 local councils.