Farmers have suffered from unreliable water delivery since the closing of Lake Mokoan more than 15 years ago.
They have had to rely on the small Nillahcootie reservoir since then.
The state and federal governments have announced joint funding of up to $132 million for the development of a business plan and ensuing works, which could potentially also save water for the environment.
Irrigator Wayne Spinks welcomed the announcement, which he hoped would be a step forward in improving reliability and sustainability of the Broken River system.
Victorian Water Minister Gayle Tierney said the Broken Reconfiguration Project looked to remove demand on the Broken River system, contribute water to the Murray-Darling Basin Plan, increase reliability for water entitlement holders, increase domestic and stock water supply security and improve resilience against drought.
Victorian Farmers Federation Water Council chair Andrew Leahy said VFF members had worked tirelessly for many years to improve water reliability in the Broken system, as well as to secure improved stock and domestic supply.
“A special thanks must go to former VFF Water Council chair and local irrigator Richard Anderson, who worked for years to help get this across the line,” Mr Leahy said.
“This project is a direct result of years of grassroots advocacy and it’s fantastic to see that hard work finally being recognised and realised.
Mr Spinks said the two previous Victorian water ministers, Lisa Neville and Harriet Shing, had understood the issues over the past decade and supported the farmers in a quest for better reliability.
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