The European Investment Bank has agreed in principle to provide significant financial backing for the Luas Cross City project.
Negotiations will start in the coming days and are expected to be finalised early next year.
The estimated cost of linking the Red and Green Lines in Dublin is €368m.
Minister for Transport Leo Varadkar has said that if funding is secured from the European Investment Bank, it would be at a competitive rate.
He said the bank is willing to make €163m available.
Mr Varadkar said the project would create 800 jobs in construction with 60 jobs to be created when the project is completed.
Speaking on RTÉ’s Morning Ireland, the minister said the construction would cause disruption.
But he said Dublin city will remain open for business and the project will transform rail-based public transport in the Dublin area.
Meanwhile, new traffic arrangements come into effect this evening on St Stephen's Green to facilitate work on the new Luas line.
Two right-turning lanes from St Stephen's Green East to Merrion Row will become operational to provide access to the city's northside via Merrion Street Upper and access to the N11 through Baggot Street.
