The government confirmed the decision after a meeting of its Airports Sub Committee.
A further study will now take place to look into issues such as planning consent and air quality.
The Airports Commission, headed by Sir Howard Davies, issued its final report in July, backing expansion at Heathrow but leaving the door open for Gatwick.
David Cameron said afterwards that he guaranteed a decision would be made before the end of this year.
The prime minister is in a difficult position because he previously gave a “no ifs, no buts” promise not to expand Heathrow.
Secretary of state for transport Patrick McLoughlin said: “The case for aviation expansion is clear – but it’s vitally important we get the decision right so that it will benefit generations to come. We will undertake more work on environmental impacts, including air quality, noise and carbon.
“We must develop the best possible package of measures to mitigate the impacts on local people. We will continue work on all the shortlisted locations, so that the timetable for more capacity set out by Sir Howard is met.
“At the first opportunity I will make a statement to the House to make clear our plans.”