Mayor Eric Garcetti made the big announcement at a news conference held at the bottom of the historic railway on Wednesday.
Garcetti said the beloved railway will reopen by Labor Day 2017.
According to the mayor, the California Public Utilities Commission has certified a plan to operate Angels Flight by high safety standards. He said the Angels Flight Railway Foundation and ACS Group recently finalized an agreement to recondition, operate and maintain the funicular for the next 30 years.
"At a moment when downtown is experiencing this resurgence, the timing couldn't be better," Garcetti said.
The funicular, which is touted as the world's shortest railway, closed in September 2013 after one of the two rail cars came off the tracks.
"When thousands of Angelenos signed a letter to me testifying on behalf of the beloved railway, I heard you," the mayor said.
When it was most recently in operation, the railway still used its original cars from 1901, named Olivet and Sinai.
Col. J.W. Eddy first opened a funicular rail up Bunker Hill on Dec. 31, 1901, when rides cost a penny.
"I can't promise the same prices that folks were paying in 1901. I can say that MTA will be giving a 50 percent discount on fares for all Metro TAP card holder," he said. This discount will be valid for the next three years.
The railway was dismantled and put into storage in 1969 because of the Bunker Hill urban renewal project, then rebuilt and reopened in 1996, a half-block south of the original site.
Angels Flight, which travels a short distance between Hill and Olive Streets on Bunker Hill in downtown Los Angeles, was recently featured in the movie, "La La Land."
The railway has given more than 100 million rides along its hillside track, city officials said in a news release.
City News Service contributed to this report.