"Their funding really helps us take the event to the next level. We are able to really boost how far outward spending goes."
The money would go a long way, he said.
"It makes it so we can do everything on a bigger and grand scale, especially the TV production side, which is so important for selling Rotorua afterwards.
"If you can generate really good TV content it will be picked up for years to come."
Crankworx co-event manager Ariki Tibble said the announcement was significant.
"It is a big win for Rotorua. It looks like a lot of the events aren't in the Central North Island region, and it's such a significant investment in Rotorua and Central North Island."
Crankworx, the world's biggest mountain bike festival, will be held in Rotorua from March 25-29, and on similar dates in 2016.
Whistler, Canada, and the French Alps have previously hosted the event.
Economic Development Minister Steven Joyce said the Major Events Development Fund helped generate significant immediate and long-term benefits.
"[Crankworx] will attract the world's best mountain biking athletes to compete on New Zealand's impressive mountain bike trails, with more than 1300 international visitors expected to travel to New Zealand next month to support the event."