The Dunedin Tunnels Trail project has received a $2 million injection from the government.
The funding will cover the extension of the cycle trail's second and third stages, which will take it through Fairfield, Abbotsford, and Green Island.
Tunnel section of trail project all go
Tourism and Hospitality Minister Louise Upston announced the investment this afternoon, saying it was hoped the trails would boost Otago's tourism.
"By investing in the Dunedin Tunnels Trail, we will attract more visitors to the Otago region, helping to unlock the region’s full tourism potential," Ms Upston said.
"This trail not only showcases New Zealand’s stunning landscapes but also supports local businesses, creates jobs and offers unforgettable experiences for visitors and locals alike."
Construction of both stages was expected to be completed by mid-2027.
It follows the near completion of the initial stage from Wingatui through the Chain Hills Tunnel, a 1.55km length that was funded by the DCC.
The trails are set to span the 15km between Dunedin and Mosgiel, linking the centres through two historic railway tunnels — the Chain Hills Tunnel and the Caversham Tunnel.
They will link to Otago's wider network of Great Rides, including the Otago Central Rail Trail, Clutha Gold Trail, Lake Dunstan Trail, Roxburgh Gorge Trail, and Queenstown Trails.
Ms Upston said the investment was part of the government’s recently announced Major Events and Tourism Package.
"We are proud to support projects that deliver real economic impact and can get underway immediately. I’m looking forward to seeing this one take shape," she said.
"There’s a real sense of momentum building across our cycling network and tourism sector. It’s great to see rising visitor numbers and regional spending but there’s still more to do to get our tourism sector cranking."
The tunnel's construction had been the result of 20 years of advocacy from the Tunnels Trail Trust.
When speaking to the Otago Daily Times in late-August, Trust chairman Brent Irwing said it had been good to see the progress after those 20 years.