It will be based at St Matthew's Church, close to the university's St Luke's campus and will open in time for Freshers' Week in September.
The project is being led by former Exeter student, Reverend Ed Hodges, who has moved back to the city to take up the role along with his wife Jess, who also studied at Exeter, and their two children.
He said the church's vision was to be "a beating heart for Exeter...creating a sense of belonging and equipping people to lead extraordinary Christian lives.
"Our aim is to reach a generation who might otherwise never come to church and that means making church accessible and relevant and welcoming."
Both he and Jess say they want young people to feel "at home" at the church, lining up a local coffee roaster and looking at how they can help peopel feel welcome.
Exeter has around 30,000 students but research by the Diocese of Exeter revealed that only around 350 of them regularly attend some form of Christian worship.
The St Matthew's project aims to grow weekly attendance to more than 400 young people within five years, the majority of whom are unlikely to have attended church regularly in the past.
Work begins over the summer to make the current church building more student-friendly and the team also aims to plant two more churches in Exeter over the period of the project.
The new church community will have a strong emphasis on social action and is hoping to partner with existing organisations in the city including Exeter's St Petrocks' homeless charity and the debt-relief charity Christians Against Poverty.
One part of their successful funding bid involves supporting ex-offenders living in the community.
The Bishop of Exeter, Rt Rev'd Robert Atwell, said: "I am thrilled with the success of our bid to enhance our engagement with Exeter's massive and burgeoning student community.
"We have an outstanding university in Exeter, which needs to be matched by vibrant and innovative Christian outreach to students as they search for meaning and purpose in their lives.
"The St Matthews project will complement the great work already being done by churches and other local organisations in Exeter.
"The new team will be working alongside them and I'm hugely excited."
The grant from the Church of England's Strategic Development Fund has been awarded to the Diocese of Exeter as part of its national Renewal and Reform programme, which aims to create a growing church for all people and for all places.
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