It will include the installation of an innovative green energy lighting system, which will cut the carbon footprint of the fountains by an estimated 90%.
The Grade II-listed fountains, which date back to 1845 and attract 13m people a year, will also be cleaned and restored to help preserve and protect them.
A state-of the-art LED lighting system will replace the current lights which are beyond repair, providing permanent coloured lighting effects for the first time.
Several hundred square metres of hoarding will be erected around the fountains to cover up the works, which are due to take place from March to May 2009 -- giving a brand exposure in one of the busiest spaces in Europe.
Mayor of London Boris Johnson said: "It is tremendously exciting that the world-renowned Trafalgar Square fountains and their statues are set for a makeover ahead of the London Olympics. Millions of visitors to the square, and the myriad of events that it hosts, will benefit from this revamp.
"As well as being lovingly spruced up, the historic Portland stone, granite and bronze monument is set to go green, with a fabulous set of low energy, cost-saving, coloured LED lights.
"This will provide state-of-the-art illuminations for the fountains, whilst providing a showcase for low-carbon, energy efficient lighting in the capital."
The refurbishment of the fountains follows the once-in-a-generation restoration of Nelson's Column, which was completed in partnership with Zurich Insurance in 2006.
Speaking about the sponsorship opportunity presented by this latest project, Daniel Ritterband, who advises the Mayor on marketing, said the move was part of Johnson's commitment to offer London taxpayers value for money.
"The Mayor is delighted to bring this unique branding opportunity to market. The refurbishment of the Trafalgar Square fountains is long overdue and once complete will enhance the overall experience of the numerous events and festivals that take place there."
The fountains were designed by Sir Charles Barry and were later remodelled by Sir Edwin Lutyens starting in the late 1930s and completed after World War II.