More than £10m for the development of City of Derry Airport is being provided by the British and Irish governments.
£10m of funding to go to City of Derry Airport
It means that up to 17 homes in the vicinity of the airport may have to be demolished.
The money will fund cost overruns on previous runway projects, safety work and clearing obstacles at the western end of the runway.
It follows requests from Derry City Council and MP for the area John Hume for funding.
The funding was announced by NIO Regional Development Minister John Spellar and Irish Foreign Affairs Minister Dermot Ahern.
"City of Derry Airport is highly valued by the people and businesses of the north west," Mr Spellar said.
"Its importance was recognised in the Regional Development Strategy and it is seen as very important for the development of the region."
It had originally been planned to extend the runway at the airport by 400 metres, however a review of the proposals in November 2004 deemed this unnecessary.
"We must all recognise that the revised proposals require the acquisition and removal of a number of properties in the vicinity of the airport," Mr Spellar said.
"I sympathise with the concerns of all those whose homes and property would be affected, and assure them that due process will be applied and that their interests will be taken fully into account."
Local resident Kieran O'Brien said he was disappointed by the news as some very strong arguments had been presented against giving more public money to the airport.
"We're also disappointed the minister hasn't waited for the outcome of the Northern Ireland Affairs Committee inquiry on air transport in which some very serious questions were asked of City of Derry Airport," Mr O'Brien said.
He said local residents would continue to fight the plans.
The airport is owned and operated by Derry City Council.
The funding is subject to a number of conditions.