The inaugural Tarawera 100 Miler will take place in February 2018 alongside the 10th annual Tarawera Ultramarathon.
Race director Tim Day said he was excited about what the funding could help them achieve. He said 60 per cent of the people who had already entered were from overseas.
"What they're bringing is millions of dollars into Rotorua and even more into the country," he said.
"I guess the really exciting thing, is this funding gives us the opportunity to really bring this race into town."
Rotorua MP Todd McClay said the plan was for the 100 mile race to start and finish in central Rotorua near the Village Green and while formal approval was yet to be granted talks with the council had so far been productive.
"We have the most beautiful backdrop in the world, a fantastic course, a quality field of runners, and now the extra investment to help further promote this race and Rotorua to the world."
He said he would like to see the Tarawera Ultramarathon become New Zealand's premier running event and the new Government funding would help attract even more overseas competitors.
"This is a fantastic chance to show even more of Rotorua off to an international audience. There will also be an immediate boost to our local economy given that at least 1150 overseas competitors are expected to stay here for an average of nine days," said Mr McClay.
A Rotorua Lakes Council spokeswoman confirmed the council was in discussions about bringing the race into the central city.
Rotorua deputy mayor and economic development portfolio lead Dave Donaldson said it was great to see events that showcased Rotorua's natural active environment receiving a boost.
"As has happened with mountain biking, we're now seeing trail runners moving to Rotorua, along with related businesses around these events and the running industry," he said.
Mr Donaldson said the Tarawera event highlighted what was good about Rotorua - forests and lakes, the history and stories which are a major attraction for entrants.
"Hundreds of internationals take part and take their experience of Rotorua back home with them," he said.
"Outdoor type events have become additional attractors in Rotorua, for locals and for visitors, adding to our existing offering and providing economic benefits through visitor spending and employment."
This latest funding follows $7.7m worth of recent Government support for events and attractions in Rotorua, including $3.2m for this year's Crankworx and Mud Festival events.
