Islington Council has made the investment under 'Invest to Save' - expanding the existing local provision for people with Autism from 8 to 30 places.
It signals a change in policy to bring special needs quality provision back in-house, rather than tendered to private organisations, as is the case in other boroughs.
Users of the new unit will be young adults who live mainly with their families but need a lot of support.
The service has been accredited by The National Autistic Society.
Cllr Janet Burgess, Islington Council's executive member for health and wellbeing said:
"In a time of cuts, we have continued to invest in council-provided services for those with moderate needs, saving council taxpayers' money while improving outcomes for residents, who can access services near home.
"These facilities are state of the art and will make a huge difference to autistic clients and their families - affording service users a degree of independence and choice.
"We hope the service will become the 'gold standard' that other councils aspire to in supporting residents with special needs."
The Daylight Spectrum, Highbury New Park, N5, has been specially designed with the needs of autistic clients in mind. The new building's organic design features curved walls, neutral colours and non-flickering lights.
The environment is 'low arousal' to help people with autism cope with their sensory sensitivities. There is also a sensory room, a soft play area as well as a gym to offer different kinds of stimulation required by residents with autism.
Before the expansion of the in-borough service, some autistic spectrum clients went out of borough to access day centre provision. These arranagements made quality monitoring harder and reduced contact time with their families and friends.
The new unit features up to date resources available for staff to offer residents with autism a variety of choices and increase their independence.