Victoria's Avalon Airport is set to become the state's second international airport.
The federal government announced on Friday it would amend the airport's lease, allowing it to build a new terminal to service international passenger flights.
Avalon Airport chief executive Justin Giddings described it as a win for the region and Victoria.
"This decision cements Avalon's future as Victoria's second major domestic and new international airport," Mr Giddings said in a statement.
Premier Ted Baillieu said the Commonwealth's decision to amend the airport's lease to allow it build the international terminal was long overdue and major airlines will now be able to invest with more certainty.
"This was a major roadblock we highlighted when we committed to support Avalon Airport becoming Victoria's second international airport in 2008," he said.
The lease conditions for the airport, 55km southwest of the Melbourne CBD, have been amended to allow the building of a new terminal up to 10,000 square metres to a cost of $15 million without triggering the need to do a major development plan.
The amendment has enabled the airport to avoid red tape, cutting at least two years from the time an agreement is reached with an airline to when flights can begin, Mr Giddings said.
"With this decision, we can now get on with the job of securing an international carrier and building international passenger facilities with just a local building permit required," he said.
Mr Giddings said with the approval for an international terminal at Avalon a reality and the Victorian government's financial commitment to a rail link to Avalon, the airport was well placed to meet growing demand.
The state economy would also be able to capitalise on the many trade and tourism opportunities emerging in the Asian region, he said.
Mr Baillieu said the government had committed $50 million for the design, planning, land acquisition and preliminary construction works of a rail link to Avalon Airport and $3 million to develop a fuel line to pipe aviation fuel from Shell Geelong directly to the airport.
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