The donation of a major new international collection of contemporary art valued at £125 million was announced this morning at Edinburgh's Scottish National Gallery of Modern Art.

‘Artist Rooms’ is being created through a donation made by collector Anthony d'Offay and his wife Anne who amassed the collection of 725 pieces over a period of 28 years.

Secretary of state for culture, media and sport Andy Burnham said: ‘We would need to look back to the late 19th century or the early 20th century with the likes of Sir Henry Tate to see a similar sized gesture.’

The concept behind the exhibition is a series of 50 individual rooms devoted to 25 particular artists and will include works by Joseph Beuys, Damien Hirst and Andy Warhol.

An additional seven artists will be represented.

The collection is to be owned and managed jointly by Tate and National Galleries of Scotland and will tour throughout Britain to a wide range of partner galleries.

The director-general of the National Galleries of Scotland, John Leighton, said: 'It really will be hard to exaggerate the importance these collections will have. From today we will not have to say to our children wanting to see famous work "go to Amsterdam or Berlin." We can say "go to Aberdeen or Stromness."'

D'Offay's philanthropy was praised by representatives of the art sector and ministers alike.

Linda Fabiani MSP, minister for Europe, external affairs and culture, called it ‘a once in a generation visionary event’. Although he will receive the £26.5m he originally paid for the collection, d'Offay will make no profit, equating to a donation worth nearly £100m.

Nicholas Serota, director of the Tate, said: ‘A gift of this magnitude will completely transform the opportunity to experience contemporary art in the UK. Anthony d'Offay's imaginative generosity establishes a new dynamic for national collections and is without precedent anywhere in the world.’

The £28m required to buy and display the art comes from the Scottish and Westminster government, the National Heritage Memorial Fund and the Art Fund.

A further provision for the establishment of a £5m endowment fund for the acquisition of future rooms has been planned with Tate and National Galleries of Scotland each contributing an initial £500,000.

It is hoped that Artist Rooms will extend with future donations and include the works of up-coming artists.

David Barry, the director of the Art Fund, said: ‘It is in a sense the democratisation of art. It is essential to bring great works of art to the greatest number of people and the impact of Artist Rooms is so huge because they are going to travel. Artist Rooms is going to have a truly transformational impact.’

Edinburgh was favoured over London to launch the collection owing to d'Offay's affinity with the city where he studied art in the 60s and initiated the 2007 Andy Warhol: A Celebration of Life and Death exhibition.

Linda Fabiani said this morning's announcement was the start of a ‘modern Renaissance’ which will establish Scotland as a platform for contemporary art and strengthen its international impact.

A series of opening displays will go on show at the Tate Galleries and National Galleries of Scotland next spring, with exhibitions touring to venues including the Aberdeen Art Gallery and Museum and The Pier Arts Centre, Orkney.