After years of wrangling over how to finance a second S-Bahn corridor stretching eastward from the city's main station, below the Old Town and the Isar River, on to the Ostbahnhof, state officials hashed out agreement with the federal government over where to find €700 million late on Tuesday.
While the state of Bavaria will cover €100 million, the federal government will pick up €108 million. The rest of the gap will be plugged by reclaiming a €492 million loan to the Munich Airport.
"The path for the second main route has been cleared," said Bavarian Transport Minister Martin Zeil late on Tuesday.
Construction on the massive tunnel, which aims to relieve regional rail congestion throughout southern Bavaria, could begin as soon at 2014 and finish by 2020. Currently, small problems along Munich's main east-west axis can disrupt the city's entire commuter train service.
However, not everyone in the Bavarian capital is supportive of what would be the largest infrastructure project in the state.
Residents near Marienhof in the historic centre have complained about what years of construction would do to their neighbourhood and people in Haidhausen, west of the Isar have already filed some 1,400 complaints against the plans.
But Zeil said the project would not be held up by legal challenges, as it would not be "justifiable to wait years," according to Munich daily the Süddeutsche Zeitung. "The citizenry will have to cope."