Extending the Borders Railway is to be considered as part of a new Scottish Government-commissioned study into improving transport in the south of Scotland.
There have been calls for the Edinburgh to Tweedbank line to be continued 60 miles further south to Carlisle.
The SNP pledged to look into the feasibility of extending the rail link at last year’s Holyrood election.
Transport Scotland intends to appoint Jacobs UK to carry out the study into road, rail and public transport in the region.
It is expected to take around seven months to complete.
It will look at access between the Borders and central Scotland, and the north-east and west of England.
Links between the region and the key cities of Edinburgh, Newcastle and Carlisle will also be considered.
The findings will help shape the Scottish Government’s Strategic Transport Projects Review (STPR), which will look at future travel proposals for the whole of Scotland.
Transport Minister Humza Yousaf said: “In the Scottish Government’s programme for government, a commitment was given to examine the case for an extension of the Borders Railway along with improvements to the A1, A7 and A68.
“This study will take forward that commitment by considering how we improve accessibility in the Borders, link communities to key markets through strategic transport routes and identify where improvements to transport links are required.
“We want to build on the existing Borders Railway by considering whether it should be extended to Carlisle. The study will also look at how we improve access from the Scottish Borders to key markets in to Edinburgh, Carlisle and Newcastle.
“Working with partners in Scottish Borders Council and SEStran, Transport Scotland will identify a range of options for improving transport that can be considered as part of the review of the Strategic Transport Projects Review which will look at future transport infrastructure projects for the whole of Scotland.
“These options could include new rail services, improvements to existing road infrastructure and improved public transport provision.”
Scottish Liberal Democrat transport spokesman Mike Rumbles said: “Bosses at Borders and Carlisle councils, Liberal Democrat campaigners and local people have long called for a study to be conducted into the feasibility of extending the line.
“Extending the Borders Railway could have a huge effect on the region, improving transport links to major markets and boosting the economy.”
Earlier this year, it emerged that tourism had received a major boost since the introduction of the Borders Railway, which was officially opened by the Queen.
The Scottish Tourism Economic Assessment Monitor said there had been a 12.3 per cent rise in the number of days visitors are spending in hotels and bed and breakfasts in Midlothian.