The Prime Minister has publicly backed down from his insistence the Victorian Government build the East West Link road tunnel, instead committing to consider funding another major road project.

Tony Abbott sparked a war of words with Victorian Premier Daniel Andrews earlier this month when he wrote a strongly-worded letter urging him not to abandon the project or introduce legislation to cancel the contract to build it.

Mr Andrews maintained the contracts were invalid and said he would not be bullied into breaking an election promise.

The two leaders have met in Melbourne this morning.

Mr Abbott said it was now clear the controversial project would not go ahead.

"The West Gate Bridge bottleneck, the Eastern Freeway bottleneck, the Hoddle Street bottleneck, these are the choke points of Melbourne traffic," he said.

"If East West Link is off the table as far as the Victorian Government is concerned, let's see what else might be possible that will address these major bottlenecks and which will be worthy recipients of major Commonwealth funding.

"The Commonwealth Government is determined that our money will be used to address these major choke points and let's see what we can come up with in the weeks and months ahead."

Mr Andrews said he had a positive meeting with Mr Abbott.

"At the end of the meeting it was agreed that the Victorian Government is not proceeding with the East West Link," he said.

"But what we should do and what we agreed to do in light of that fact is to work together on other projects that can deal with congestion."

The Federal Government has given Victoria $1.5 billion to build the road, which the Prime Minister had insisted could only be spent on East West link.

Mr Abbott indicated that money could be spent on other projects, but ruled out funding urban rail upgrades.

Mr Andrews said he would have further talks with the Prime Minister to secure the funding.

"We're going to do some really hard work in coming weeks and months to identify those projects and I do hope we'll have more to say about that in the future," he said.

Commonwealth focused on roads funding

The Andrews Government said it was focused on building the Melbourne Metro Rail tunnel and removing the 50 worst level crossings.

But Mr Abbott said it was not the Commonwealth's role to fund public transport.

"Our position has been that the Commonwealth has to stick to its knitting," he said.

"And our knitting, if you like, is major national roads and freight rail.

"But urban rail, commuter rail, that is the responsibility of the state governments which build it, which own it and which operate it."