The Scottish Executive is giving £3.7m to a plan to increase capacity and improve access to Waverley railway station in Edinburgh.
Waverley is said to be "central" to Scotland's rail potential
The money will be used by Network Rail to pay for design work associated with the first phase of the project.
The number of trains the station can accommodate each hour will rise by four to 28 by the end of 2007.
There will also be two new through platforms along with escalators, lifts and a canopy on Waverley steps.
Announcing the financial contribution, Transport Minister Nicol Stephen said: "The redevelopment of Waverley is the key to unlocking the potential of Scotland's railways.
"Beginning detailed design work is a significant step forward to delivering better services for passengers and business."
Ron McAulay, regional director of Network Rail, said: "The future of so many other railway projects is dependent on arriving at the right solution for Waverley Station.
"It is the key to new services and expansion of existing services."
Richard Bowker, of the Strategic Rail Authority, spoke of a "real improvement for passengers and users of the station".
Leader of Edinburgh City Council Donald Anderson added: "We all share high aspirations to make Waverley one of the best and most modern railway stations in Europe."
The longer-term plan, costing £150m, falls short of an ambitious train and retail redevelopment proposed by the station's former operators, Railtrack.
Increased capacity at Waverley is vital for the executive's plans to introduce new services for Fife, to accommodate longer trains on the flagship Glasgow-Edinburgh route and to re-open the Airdrie-Bathgate line.
The Scottish Green Party attacked the plans, saying they had been reduced from nine extra platforms to only two, and blamed ministers' "prioritisation" of roads over
South of Scotland Green MSP Chris Ballance said the scheme was "a poor
shadow" of the original and urged ministers to push their Westminster counterparts harder for appropriate levels of funding for a full-scale upgrade.
Sarah Boyack, the local Labour MSP and former transport minister, urged the executive to improve access at Haymarket station.
The executive said options for the future design of Haymarket station were
currently being considered in the wider context of the prospective development
of the surrounding area and tram proposals.
"It is planned that any comprehensive restructuring work would include
improved access for people with physical disabilities," a spokesman said.