South Yarra will miss out on a new underground railway station as part of the Melbourne Metro project, because under the Andrews government's plans the station would cost almost $1 billion to build and require the acquisition of more than 100 properties, potentially including part of the Jam Factory shopping centre.

The government has defied pressure from the Coalition and the Greens to include South Yarra station in its plans for the $11 billion rail tunnel, which is planned to run between South Kensington and South Yarra, bypassing the existing station by just metres.

South Yarra train station. Credit:Jesse Marlow

The station is the 11th busiest in Melbourne, used by almost 2½ million passengers a year and connecting four suburban lines.

But the economic case for building the station has been rated "very poor" in an analysis by the government's Melbourne Metro Rail Authority, because the cost and disruption would outweigh the passenger benefits.