Mace will start work on site this month to build 159 private apartments along with 42 affordable apartments.
Work will also include retail space on the ground floor and the job is due for completion in summer 2014.
Merchant Square is a mixed use development comprising six buildings, including the iconic 1 Merchant Square tower.
Mace’s 3 Merchant Square is the third building to be developed following the completion of 4 and 5 Merchant Square in 2010.
Richard Banks, CEO of European Land, said: “We are very pleased to have appointed Mace to bring our vision of luxury waterside living at 3 Merchant Square to life.
“This is the commencement of the final phases of regeneration around Paddington Basin and, when complete in 2014, this building will offer its residents stylish, high quality and practical apartments just moments from Hyde Park, Little Venice and all the amenities of the West End.
“3 Merchant Square focuses on quality and attention to detail and we are confident that Mace will deliver this vision in the completed building.”
Simon Underwood, Mace Director, said: “We are thrilled to be involved in this next phase of Merchant Square, which promises to be a landmark development for Paddington.
“3 Merchant Square is a first class prime residential and retail project and we look forward to working together with European Land to deliver an industry-leading exemplar scheme to the highest standards.”