A plan to build a multi-billion-dollar underground rail loop connecting Melbourne's western and eastern suburbs via the airport, and link all major train lines, has been unveiled by the Victorian Labor Government.

The new 90-kilometre line, which is being described as the "Ring Road" for public transport, would run between Cheltenham and Werribee via Melbourne Airport and include 12 new stations.

The $50-billion project would allow commuters to travel between suburbs without needing to come into the city. The Government said it would be "the biggest public transport project in Australian history".

The loop would connect with key stations on every suburban line and feature new regional interchanges for country travellers, and run underground between Broadmeadows and Cheltenham.

Premier Daniel Andrews announced the project via a Facebook video. The bold plan would link major suburban business and activity centres including Monash, Deakin and La Trobe universities.

Government analysis said the loop through Melbourne's middle ring would also provide more housing opportunities, with the Premier saying some of the cost of the project would be covered by value capture — where local developments benefitting from new infrastructure contributed to the cost.

It is inspired by major cities around the world such as London and Tokyo that have "polycentric" train networks.

Melbourne's current network is "monocentric" because all routes go to the centre of the city.

The section of the route between Cheltenham and Box Hill, in Melbourne's south-east and eastern suburbs, will be the first priority.

Transport Minister Jacinta Allan said initial planning would cost $300 million, with construction to start in 2022.

She said the new line would carry 400,000 passengers a day and take 200,000 cars off major roads.

The Government forecasts the loop would become the busiest train route in Melbourne once completed.

"This will be an investment," Ms Allan said.

"Just as the previous investments in the city loop were made many decades ago, the investments in a ring road were made over many decades ago."

The announcement is the latest in a string of major infrastructure projects from the Andrews Government.

Construction for the $11-billion metro tunnel project, which features five new underground stations in the city, is already underway, while Labor has said work on the much-awaited rail link to the airport could begin by 2022.

Of the four airport rail routes being considered, the State Government favours a line from the city to Tullamarine via Sunshine.

Preliminary works for the $6.7 billion West Gate Tunnel project, which would link the West Gate Freeway to CityLink, have also begun.

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