Victoria has won its $1.4 billion spat with Canberra over its reward for selling the Port of Melbourne lease, with money now flowing to regional rail upgrades.
The Turnbull government has committed to pumping $1.42 billion into regional rail and the Andrews government will tip $150 million into the fund.
The mammoth project will revamp the Ballarat and Gippsland lines and provide small upgrades to six other regional lines.
"It is going to make an enormous difference to business, to the economy of this state, to bring all of those regional cities closer to Melbourne and Melbourne closer to them," Prime Minister Malcolm Turnbull told reporters on Tuesday.
The federal government had previously offered Victoria only $877 million from the asset-recycling fund for the Port of Melbourne lease sale.
It argued the state didn't apply or get approval in time before the June 30, 2016, deadline.
Premier Daniel Andrews trumpeted a massive $1.45 billion regional rail revamp ahead of the Victorian budget in May.
But the project was completely dependent on the state getting the federal funds it says it was owed.
"We fought hard for this, because this money belongs to Victorians and we made the judgement that it all belonged to regional Victorians as well," Mr Andrews told reporters.
But Mr Turnbull says the money is coming from the infrastructure budget, not the asset recycling scheme.
AAP understands the Andrews government will not be pursuing any more money from the commonwealth under the asset recycling fund.
The upgrade to the Ballarat line includes money to improve services to Ararat and Maryborough, which connect to Melbourne through Ballarat.
And on the Gippsland line, money will go to improving services between Pakenham and Bairnsdale.
Victorian Public Transport Minister Jacinta Allan described it as a "once-in-a-generation investment".
Victoria's Regional Rail Link, which was completed in 2015, was a $5 billion project.
REGIONAL RAIL REVIVAL:
* $555.6 million - Ballarat Line
* $530 million - Gippsland Line
* $140 million - North East Line
* $110 million - Surf Coast rail including Waurn Ponds duplication
* $114 million - Warrnambool Line
* $91 million - Bendigo and Echuca Line
* $20.2 million - Murray Basin freight rail, taking the total Commonwealth commitment to the project to $240 million
* $10 million - Shepparton Line
