The Andrews government will take the unconventional step of buying the Heyfield timber mill in eastern Victoria in a bid to protect 250 jobs.

Fairfax Media understands Victorian Agriculture Minister Jaala Pulford will make an announcement on Monday confirming an in-principle deal that will eventually see the state government become the owner of the Australian Sustainable Hardwoods (ASH) timber mill.

It is believed the deal to save Australia's largest hardwood mill could cost taxpayers up to $50 million.

Earlier this year, owners Hermal Group threatened to close the mill in the small Gippsland town amid a heated dispute with the state-owned logging company VicForest over the amount of timber supplied to the mill.