AirAsia has agreed to ditch Tullamarine, in Melbourne, for Avalon Airport at Geelong, and is set to ferry hundreds of thousands of international passengers into regional Victoria each year.
The state government says the construction of the terminal, expected to cost more than $20 million, will create about 230 jobs.
Most of these will be ongoing and some are to be reserved for ex-car manufacturing workers.
"We've had our share of bad news in Geelong, with Ford and of course Alcoa and the heavy manufacturing leaving our shores ... which meant we needed to look at alternative employment methods," Tourism Minister John Eren told reporters on Sunday.
Sunday's announcement boosted calls for a rail link to Avalon Airport by its owner Linfox Group.
"We need the rail link, but that's natural," Linfox founder Lindsay Fox AC said.
"That was promised by the previous government. They might sort of react from now."
The federal government was backing the Avalon expansion but when asked about a rail link, Foreign Minister Julie Bishop said it was "early days".
"The announcement today is a significant milestone and other things will follow," she said.
AirAsia Group chief executive Tony Fernandes said flights to Indonesia and Thailand were also on the horizon for Avalon.
He "fully supported" a rail link to help keep costs down for consumers.
Victoria's Tourism Industry Council said the commitment to a second international airport had been "a long time coming" and would likely entice other airlines to the region.
The terminal would also boost food and fibre exports to southeast Asia, the government said.