Victorians should see $3 billion spent on choked roads and rail after the federal and state governments settled on how to spend the dumped East West Link funding.
Prime Minister Malcolm Turnbull says $1.5 billion promised for the controversial toll road will now go to more than 40 roads and rail projects in the state.
The Victorian government is expected to match the funding, bring the total to $3 billion.
The largest chunk of funding will go to the Monash Freeway and the Murray Basin rail freight project, while numerous outer suburban, regional and rural roads and bridges will be included.
Federal Transport Minister Darren Chester said talks with his state counterpart had been going on for six months and they settled on a deal by including one last road project - the O'Herns Road interchange.
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"We've agreed to the final position put by the Victorians in their last letter," Mr Chester.
"I am very confident the Victorian government will agree to this position."
Premier Daniel Andrews welcomed the deal but noted there was more to discuss.
"There's a few details to be worked through, but today is really good news and I'm confident we can work through those details soon," the premier told reporters.
The federal funding had been sitting unused since the Andrews Labor government decided not to go ahead with the East-West Link.
"It was sitting there not creating one job, not relieving congestion," Mr Turnbull said.
"We have broken the deadlock."
The state government noted federal approval was required so the money can be used.
"This is money that should have never have been squabbled about by the federal government in this way," State Transport Minister Jacinta Allan said.
