Work is to start next year on a new rail line into the heart of Port Adelaide with a train station to be built in Baker Street, close to the Dock One residential precinct.

Train services into the centre of the Port were discontinued back in 1981, and the old Port Dock Station was demolished in 1989, making way for a police station and courts on the site.

Transport Minister Stephen Mullighan said a modern train station would give impetus to the rejuvenation of the suburb.

"Better access to public transport will encourage more people to come to live in this unique waterfront district and also encourage people to visit the Port," he said.

"We know that people want public transport services close to where they work and close to where they live.

"Having train services close to the new housing development, but also close to where we are relocating 500 public servants to work, will be a huge boost for the centre of the Port."

The SA Government allocated $16.4 million in this week's state budget for the new rail station which will be served by a 1-kilometre spur line off the existing Outer Harbor rail line.

Port Adelaide's new train station will be close to the waterfront and the existing rail museum. ( Supplied: SA Government )

Mr Mullighan said the new service would not interfere with operations of the National Railway Museum, which is in the same part of Port Adelaide.

"We've got a lot of work to do with the museum to make sure that what we're doing is a benefit to them and doesn't harm their operations in any way," he said.

"We also need to talk to the council and some of the other land owners to make sure we're delivering this in a way that benefits everybody."

Rail museum welcomes train station

Railway Museum executive officer Bob Sampson said the spur line would be a boost for both the attraction and the wider area.

Port Adelaide's rail heritage is on show at the suburb's already-popular National Railway Museum. ( ABC: Ashley Walsh )

"Our railway museum has been established at Port Adelaide for almost 30 years and this announcement to bring suburban passenger services into the heart of our city is a huge benefit for Port Adelaide's businesses, events and local attractions," he said.

"Whilst there are some important business and operational issues that the railway museum is working through with [the Department of Transport], we remain positive that the eventual outcome will be great for both our museum and those who live, work and enjoy Port Adelaide as a whole."

Port Adelaide-Enfield Mayor Gary Johanson said the rail project would improve access to the Port for growing numbers of office workers, residents and tourists.

"We're going sort of back to the future, or back to the past almost, but looking at the future and it's going to be very well received by tourists because it's going to deliver people right into the heart of the Port around the museum precinct," he said.

Treasurer Tom Koutsantonis said it was part of ongoing efforts to improve Adelaide's public transport network.

"Three years ago this Government made a commitment to keep building South Australia [and] since then we have invested hundreds of millions of dollars to improve our public transport network," he said.

"This budget is capitalising on the work we've already done to encourage more people to catch buses, trains and trams."