Bookmaker Betfred won the auction to buy the Tote today after the British government backed a takeover deal worth around £265m (€298m).
The agreement signals the end of a long-running saga over the planned privatisation of the betting group, which employs more than 4,000 staff and injects around half its profits back into the racing industry.
Betfred beat off competition from Sport Investments Partners (SIP), a consortium led by British Airways chairman Martin Broughton and understood to have had the support of the racing industry.
Warrington-based Betfred was co-founded by current chief executive Fred Done from a single shop in Salford in 1967 and now has an estate of around 840 betting shops, with some £4bn in bets each year.
Excluding debt and pension contributions, the value to be paid to the government by Betfred is more than £180m (€202m).
This sum will be split equally between the taxpayer and the racing industry, while Betfred has committed to commercial payments to racing of £11m to March 2012 and an expected £9m a year over the following six years.
Betfred will receive an exclusive seven-year licence to operate Pool betting operations on all UK racecourses, where the Tote brand will remain.
The deal comes after more than a decade of wrangling and false starts over the privatisation of the Tote, which was set up in the UK by an Act of Parliament in 1928.
The coalition government fired the starting gun on the latest attempt to offload it into private hands during last June's Budget, with the auction process beginning in November.
Gambling and racing minister John Penrose said the government had "bent over backwards to deliver a good deal for racing".
He added: "Most people can't understand why, in the modern world, the government should be even part owner of a bookie. So we pledged last year to end years of dithering and resolve the future of the Tote, and today we have done just that."
The most recent attempt to privatise the group was abandoned in 2008 due to turbulent market conditions as the financial crisis struck.
Today's sale price is also a hefty reduction on the £400m offer submitted in 2007 by a consortium of racetrack owners, which was turned down by the government because it was backed by private equity.
The consortium re-formed soon after, but its second approach - reportedly £320m - was rejected at the time for being too low.
Another previous sale attempt was blocked in 2006 by the European Commission, which said the price was too low and tantamount to state aid.