The decision follows three years of research and a £10 note featuring novelist Jane Austen, to be issued around a year later, will also be made from polymer instead of the cotton paper currently used.
Some 13,000 people handled the new notes during a public consultation in September and 87 per cent said they favoured polymer.
Bank Governor Mark Carney said: “The quality of polymer notes is higher, they are more secure from counterfeiting, and they can be produced at a lower cost to the taxpayer and the environment.”
He brushed off fears that the notes would be damaged by heat, saying they would withstand any heat below boiling point.
The new notes will retain their familiar look including the portrait of the Queen and a historical character.
After an outcry over the lack of women on paper money, the Bank chose Jane Austen to appear on the new £10 note and has announced new guidelines which state that the choice of historical figures to feature on bank notes should “reflect the diverse nature of British society”.
Thousands signed a petition in a protest led by campaigner Caroline Criado-Perez when the Bank announced it would be replacing 19th century prison reformer Elizabeth Fry with Sir Winston Churchill on the £5 note, meaning there would be no notes featuring the face of a woman, besides the Queen.
The Bank will seek to celebrate individuals who have “shaped British thought, innovation, leadership, values and society” while seeking to avoid those “who would be unduly divisive”.