Victoria's regional rail system will get a $1.57 billion overhaul after the Turnbull government agreed to contribute an additional $600 million to fund the network's upgrade.

Earlier this year the Andrews government announced a major rail upgrade by banking on a federal funding bonus it claimed it was owed for leasing the Port of Melbourne. But the Commonwealth derided that promise as a "Santa wish list", and Victoria and the Federal Government have been locked in a bitter dispute over the money for the last two months .

V/line paid Alan Clifford more than $500,000 a year. Credit:Wayne Taylor

The additional $600 million is being claimed by the Andrews government as a victory in a drawn-out dispute over federal funding for Victoria.

But the Turnbull Government is likely to frame the cash injection as an investment in regional infrastructure, a centrepiece of the most recent federal budget.