Mr Libeskinds dramatic vision, including the tallest spire in the world, with the footprints of the twin towers grassed over and the walls of the excavated pit left exposed as a memorial to September 11, was chosen by the Lower Manhattan Development Corporation after an international architecture competition.
But the corporations right to select the final design is disputed by a number of organisations and individuals, and months of intense wrangling are likely before New Yorkers can be certain of the design.
The government-funded corporation asserted itself as the main arbiter of what should be built to replace the twin towers by announcing the result of its competition in a ceremony at the Winter Gardens overlooking Ground Zero. The winner was Mr Libeskind, who emigrated to the Bronx from Poland as a boy and studied architecture in the city. The designer of the Jewish Museum in Berlin, he has waged a fierce campaign to have his $330 million (£220 million) scheme selected and has not been shy to denigrate his rivals.
There would be many reminders of the terrorist attacks. Along with Liberty Park and a Park of Heroes, each year at exactly the time the twin towers were struck by hijacked planes, sunlight would flood September 11 Plaza. There would be a grand memorial, a memorial museum, a luxury hotel, a 2,200-seat theatre and several office towers, all still to be designed.
George Pataki, the New York state Governor, described the Libeskind tower as an inspiring symbol that stretches into the sky. Michael Bloomberg, the citys mayor, said: It is guaranteed to become an internationally recognised icon of our city.
Despite the confidence of the announcement yesterday, several other bodies and individuals have an equal claim to deciding the future of the site, among them the powerful New York and New Jersey Port Authority, which owns the land, and the developer Larry Silverstein, who bought the 99-year lease on the twin towers and has the legal right to rebuild. Both insist they will consider any proposals put before them, but they claim they are entitled to build what they please.
At yesterdays ceremony Joseph Seymour, head of the Port Authority, said: Although todays announcement is a milestone in the history of Lower Manhattan, our work is just beginning. John Whitehead, chairman of the corporation, said there was much more work to do and that the plan was merely the best map with which to start the journey.
Mr Libeskind acknowledged that he had been obliged to alter his plan, raising the level of the memorial garden by 40ft to accommodate underground railway lines and a bus terminal. He described architecture as the art of compromise.
James E. McGreevey, Governor of New Jersey and co-owner of the Port Authority, was more ominous. He did not attend the ceremony and issued a statement saying: I understand that there are many complex issues left to resolve. He said that he looked forward to working with the victims families, the City and State of New York, the Port Authority and LMDC.
Although Mr Silverstein attended yesterdays announcement, he was pointedly not asked to speak. After the ceremony he declined to repeat how his plans differ from those of the corporation. He said this month that he was not satisfied with Mr Libeskinds plans, that he doubted that people would be prepared to work in a tower as high as planned and that leaving the pit open would deter the commercial tenants he needed to attract people to his offices.
Mr Silverstein has also said the plans must find room for a giant shopping complex to replace the subterranean World Trade Centre shopping mall demolished on September 11, which was the most profitable retail space in America.
Even the corporation disagreed internally over the Libeskind design. The advisory committee appointed to pick the best architectural scheme chose on Tuesday the stainless steel twin towers of Mr Libeskinds main rival, the Think group. On Wednesday they were overruled by the board.
The ownership of the site is also in question. The Port Authority is in negotiations to sell the site to the city in exchange for the deeds to New Yorks two airports, John F.Kennedy and La Guardia. The city would like an additional payment of $800 million; the Port Authority is prepared to pay $600 million.
If the deal does not go through, the Port Authority has made it clear that the redeveloped World Trade Centre would need to earn $120 million a year, the rent which Mr Silverstein currently pays. Such a sum could only be raised by dense commercial development.
The wrangling, which could take months to settle, leaves the Libeskind design vulnerable. A version of the glass tower may survive, because it was well liked as a striking addition to the skyline. The largely empty spiral glass spire, echoing the contours of the Statue of Liberty, is 1,776ft tall, a tribute to the year of Americas independence.
But while the planners argue, work at Ground Zero continues. Mr Libeskinds plan to leave exposed the 70ft concrete retaining walls of the bath tub, which keep out the seeping water from the Hudson River, has been overtaken. Hectic work on the enormous rail junction linking commuter trains to the subway already fills half the space in the pit and the foundations are being dug for Mr Silversteins World Trade Centre building adjacent to the site.
Some groups, such as the Coalition of 9/11 Families, representing relatives of victims, said that they still felt excluded from the process, despite a series of public meetings and opportunities for New Yorkers to vote their preferences.
Bruce DeCell, whose son-in-law Mark Petrocelli was killed in the attack, said on the sidelines of yesterdays event: I want them to take the whole process out of the back room and we want to be included.
The buildings regarded as the worlds highest are the Petronas Towers in Kuala Lumpur, Malaysia, at 1,483ft. The Sears Tower in Chicago is 1,454ft and the tallest free-standing tower is the CN Tower in Toronto, Canada, at 1,815ft.