The Government and Wellington Regional Council will fund an in-depth feasibility study on a planned irrigation network in Wairarapa.
The Wairarapa Water Use Project aims to irrigate between 30,000 and 50,000 hectares of farmland in the region. The project has received $2.5 million in funding to further investigate how best to store the water.
As well as guaranteeing water supply for farmers, Wellington Regional Council says the irrigation network will secure urban water supplies.
An economic analysis in 2009 estimated that over 25 years, the irrigation project would bring in $430 million of additional farm-gate value to Wairarapa's farmers.
The analysis also predicted there would be large land-use changes as farmers moved out of sheep and beef production and into dairy farming and intensive cropping in the irrigated area.