The plan also calls for electricity rate increases:
The takeover, the details of which have widely reported in recent months, will avert the collapse of Tepco, the supplier of power to almost 45 million people in and around Tokyo.
The injection of 1 trillion yen ($12.5 billion) into Tepco brings the total government support for the company to at least 3.5 trillion yen since the meltdown at Fukushima in March last year. The eventual cost of the nuclear disaster, including compensation and clean-up costs, has been estimated at more than $100 billion.
"Without the state funds, (Tepco) cannot provide a stable supply of electricity and pay for compensation and decommissioning costs," Trade and Industry Minister Yukio Edano said after approving a turnaround plan from the utility that paves the way for an effective takeover.
Tepco lodged a formal request for government support last month after months of dragging its feet for months as it has sought to avoid losing control.
The government will have more than half of Tepco's voting shares, according to the plan approved by Edano. It will also take convertible stock that, when converted, will increase the government's control to more than two-thirds.
Tepco Chairman Tsunehisa Katsumata will be replaced by an official in the government's bailout body, and a new president was announced this week, the second since the disaster.
The takeover allows the government to push though reforms at the utility, which downplayed the risks of earthquakes and tsunamis at its nuclear stations and covered up safety lapses.
The plan, compiled by Tepco and a state-backed bailout fund, and submitted to the government on April 27, addresses the need to raise electricity rates for households by 10 percent and to provide Tepco with additional loans by financial institutions.