Transport Secretly Chris Grayling and Mark Carne, Chief executive of Network Rail were at a special event in York to announce the changes to the train line.
The route connects York, Thirsk, Northallerton and Leeds to Manchester and Liverpool. It will be the country's first digitally controlled intercity railway and significantly cut journey time down.
Digital signalling technology is already in operation on the London Underground, and Network Rail will now develop options to make the TransPennine route the first digitally controlled intercity rail line in the country.
Network Rail will receive up to £5 million to develop proposals for embedding digital technology on the route. This includes looking at a system of advanced train traffic management – so that a computer works out how to route the trains most efficiently along the line.
Transport Secretary, Chris Grayling, said: "We are investing in the biggest modernisation of our railway since Victorian times to deliver what passengers want to see – faster, more reliable and more comfortable journeys.
"We are about to see a digital revolution in our railways, and we want the north to lead the way.”
Chief executive of Network Rail Mark Carne added: “Transforming our railway into the digital age offers the chance to deliver huge benefits for our passengers and the freight that this country depends on. It is the most cost-efficient way to deliver the future railway Britain needs.”