A £300,000 feasibility study into the Aberystwyth to Carmarthen railway line will begin in September.
The Welsh Government has allocated the cash following a long-running campaign by Traws Link Cymru.
Transport for Wales has chosen the engineering consultancy firm Mott Macdonald to carry out the work, who were also responsible for reviewing the case for the now reopened Borders railway in Scotland.
A scoping study, published in December 2015, concluded that over 97 per cent of the former trackbed was free of development and that there “were no major obstacles” in reinstating the line, which closed to passengers among the Beeching cuts to railways in 1965.
A report in 2015 for the Welsh Government suggested the opening of the line could cost between £500m and £750m, with some parts of the original route now built upon.
The report said the original route would “not necessarily be the optimal one in today’s environment, although it is recognised that the topography of the area does not readily lend itself to alternative railway alignments”.
The £300,000 feasibility study into the line was secured as part of the budget negotiations between Plaid Cymru and Labour.
Traws Link Cymru chairman Adrian Kendon said: “We are absolutely delighted that the full feasibility study is finally going ahead.
“Traws Link Cymru will be fully involved with the work to provide local knowledge and statistics to the engineers."
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