The grocer revealed that more than 400 milk farmers will benefit immediately from the price rise, and be paid about 22p per litre. And a further 450 farmers will receive increases by the end of the year, when the deal is rolled out across the supermarket's supply base.
Dairy head Kari Daniels said: 'This initiative means a major restructuring of our milk business, so naturally it takes some time to implement. But the response from the industry has been fantastic and I'm delighted at the speed with which we have got these contracts in place.'
The announcement comes as part of Tesco's£25 million initiative to support the British dairy industry, announced last April.
National Farmers Union spokesman Gwyn Jones added: 'Its great news that so many farmers are already benefiting and we look forward to this being rolled out to the whole of Tesco's supply chain later this year.'