The funding will allow track to be laid along a disused railway line between Bicester and Bletchley, in Buckinghamshire.
This phase two western section of the project will include the construction of a new station at Winslow, as well as enhancements to existing stations along the route, including Bletchley.
The East West Rail Alliance of Atkins, Laing O’Rourke, Volker Rail and Network rail is delivering phase two works.
The Department for Transport said the works will create 1,500 jobs, and have a wider economic benefit for the area.
Simon Blanchflower, chief executive officer at East West Railway Company, said: “We are delighted that the Government has shown a big commitment to East West Rail and the Oxford Cambridge Arc with today’s investment decision.
“This funding will enable us to get on with the construction work that will connect communities who live on the East West Rail link.”
The Government also confirmed it would release £34m to rapidly progress plans to reopen the Northumberland line between Newcastle-upon-Tyne and Ashington.
This was closed to passengers in 1964 as part of the Beeching cuts.
The cash will fund preparatory works, including land acquisition, detailed design work and early site works.
Plans for the project include new stations at Ashington, Bedlington, Blyth Bebside, Newsham, Seaton Delaval and Northumberland Park, in North Tyneside, as well as upgrades to the track and changes to level crossings where bridges or underpasses may need to be built.
Transport secretary Grant Shapps also invited submissions for the third and final round funding to encourage proposals to reopen disused lines, services and stations.
The latest round will run until March 5, with successful bids due to be announced later this summer.