The council is taking a cautious approach to tendering after major cost overruns on the earlier city centre phases.
Under present two-stage bidding plans councillors will not make a final decision on taking the tram to Newhaven until autumn 2018.
The 12-month tendering period will allow the council to assess project affordability and consider any lessons learned from the Edinburgh Tram Inquiry currently under way.
Council Leader Adam McVey said: “Given the rate of growth forecast for Edinburgh over the coming years, we simply cannot stand still.
“And yet we can’t proceed with work to take trams down to Newhaven unless we’re 100% certain we’ve rigorously scrutinised the business case and taken on board crucial lessons from the first phase.”
He added: “Having pored over the Outline Business Case in microscopic detail these past few weeks, including obtaining independent advice on it, I’m confident our project team – which retains key personnel from the team who got the first phase back on track – is now well placed to move on to the next stage and start the procurement process for a contractor.
“We will only make our final decision next autumn once the tendering process has completed and once we’ve consulted an independent assessor on the viability of the proposed construction contracts.
“We’ll also of course consider any lessons learned from Lord Hardie’s ongoing tram inquiry as we move forward.”
Construction work is expected to take three years, including 18 months on Leith Walk, followed by four months of testing and commissioning on the new line.