The business case for a passenger rail start-up trial from Hamilton to Auckland has been approved by the NZ Transport Agency.
Transport Minister Phil Twyford said it was an "exciting step" towards the planned rollout of a five-year trial service to begin in March 2020.
"We know more and more people are commuting between Hamilton and Auckland, and introducing this trial service will give them a choice in how they do that," Twyford said.
The business case allows for the fit-out of rolling stock and design of infrastructure.
The five-year trial was estimated to cost $78.2 million, including $68.4m from the NZTA and $9.8m from local authorities.
Hamilton Mayor Andrew King said the rail service would be a great boost for the region.
"This is a significant and welcome contribution to supporting population and economic growth in the Hamilton to Auckland corridor, and it's an example of partnerships and collaboration producing great results," King said.
"We look forward to seeing the details of the Board decision and the next steps."
Twyford said the Government was committed to investing close to $4 billion in public transport, rapid transit and metro rail across New Zealand.
The trial would demonstrate how investing in public transport could help manage growth and shape New Zealand's towns and cities.
The service would stop in Hamilton at Frankton and The Base in Rotokauri before going on to Huntly and stopping in Papakura in Auckland, where passengers could change onto the Auckland network.
Future stops could include, Te Kauwhata, Pokeno and Tuakau.
A new station including a platform and Park & Ride parking area would be created as part of the Rotokauri rail stop and the Huntly platform would need to be upgraded.
The service would start with a four-carriage train which can carry 150 passengers each way.
"As demand grows, it would be expanded to a five-carriage train carrying up to 200 passengers," Twyford said.
The NZTA would now work with local councils and KiwiRail to develop a pre-implementation plan in early 2019.