The 27.1km Orange Line, 25.4km of which will be elevated, will run from Ali Town via the main railway station and the University of Engineering and Technology to Dera Gujran. It will have capacity for 30,000 passenger per hour and is expected to serve 250,000 passengers per day
The project was initially agreed between the Chinese and Pakistan governments in May 2014. However, a series of national sit-in protests delayed progress.
As part of the agreement for the project, Chinese contractors are responsible for construction but they have said that they could subcontract electrical and mechanical works to Pakistani companies. Pakistan's chief minister Mr Shahbaz Sharif says the project will be completed within 27 months.
Funding for the project is part of the larger $US 46bn China-Pakistan Economic Corridor agreement signed in April, which is a major investment in Pakistan's transport, telecommunications and energy infrastructure as part of China's One Belt, One Road strategy.
China's prime minister Mr Li Keqiang has described the project as gift from the Chinese people to Pakistan.