A full feasibility study into reopening the Aberystwyth-Carmarthen railway will begin in September.
The government has allocated £300,000 towards the study following a successful campaign by Traws Link Cymru.
Transport for Wales has chosen the engineering consultancy firm Mott Macdonald to carry out the work. They were also responsible for reviewing the case for the now reopened Borders railway in Scotland.
A scoping study was published in December 2015 which concluded that over 97% of the former trackbed was free of development and that there were no major obstacles in reinstating the line, which closed to passengers in 1965.
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.
“You only have to look at the success of the Borders railway in Scotland to see that reinstated lines breathe new life into areas, bringing investment and tourism which boosts the local economy. It shows that if you build it, they will come.”
The greatest barriers are thought to be in the Aberystwyth area where there has been extensive development since the railway closed. It is thought it may be necessary to build a tunnel.