It is estimated the project would cost at least $4 billion and take about 10 years to complete. The state government would be required to match the federal funding of $2 billion.
Prime Minister Scott Morrison said he estimated construction would begin in two years.
"As our population grows,fast rail networks are crucial to easing the congestion pressures in our cities and shaping Australia’s future,"he said.
"This is all part of our plan to manage population growth that I announced this week to take the pressure off our big cities like Melbourne and make our regional cities like Geelong even more attractive places to live and work."
The Prime Minster said the Geelong fast rail would also take pressure off the Princes Freeway and West Gate Bridge. He said the freeway normally sees more than 54,000 vehicles pass through each day.