The Caledonian Sleeper rail service will follow ScotRail into public ownership later this year, the Scottish Government has announced.
The move comes after ministers decided last year to terminate Serco's contract to run the service seven years early.
The out-sourcing company will stop operating the cross-border rail service when its contract expires in June, at which point it will be nationalised.
The service, which has been operating in various forms since 1873, runs overnight trains between Scotland and London.
There is a Lowlander route between London and Glasgow and Edinburgh, and a Highlander route to Aberdeen, Inverness and Fort William.
'Stability and certainty'
In a statement to MSPs, Transport Minister Jenny Gilruth said an arm's length company of the government would take over the franchise on 25 June.
She said the step would "provide stability and certainty" for passengers and staff.
The current franchise was awarded to Serco in a deal worth £800m. It had been due to run from 2015 to 2030.
The decision to end Serco's contract came after the company tried to renegotiate the deal through a "rebase clause", to put the loss-making service on "a more sustainable financial footing".
Ms Gilruth said the decision not to rebase was "in no way a reflection on the quality of the product that has been developed, nor on the commitment of the staff who deliver this service every day".
She added: "Rather, the decision that I had to take on rebasing was a question of the terms of the rebase offer and that, in the government's view, these terms did not represent the best value for money."
Disappointment
John Whitehurst, managing director of Serco's transport business, said the company was disappointed that the Scottish government "did not ensure value for money by examining the possibility of a direct contract award to Serco".
He argued that the award would have "allowed Scotland to benefit from the expertise of our Serco Transport senior management team who understand this complex and unique hospitality-focussed train operation like no-one else, while also enabling Scottish ministers to be in complete control of the contract".
He told the BBC: "Most importantly, this would have allowed the Scottish Government to compare the price of such an award with that of their arm's length operator of last resort company."