A laboratory one kilometre below ground in regional Victoria is set to become the southern hemisphere's epicentre for dark matter research.

Plans for the $10 million Stawell Underground Physics Laboratory will take shape deep in an unused section of gold mine.

“In our universe, the matter that we are made of is a very small amount – less than five per cent – (of) all the material of the universe. So we need to understand what the majority of the universe is made of, that’s why we look for dark matter,” lab director Professor Elisabetta Barberio told AAP on Thursday.

“Dark matter exists. This is the discovery of what type of particle dark matter could be.”

The laboratory will be deep underground where there is no light from the sun or stars.

Tuesday’s federal budget allocated $5 million over two years to the University of Melbourne to start work on the centre.

“The facility will be the first of its kind in the southern hemisphere and will support Australian astro-particle researchers to become global players in dark matter research,” the budget outlined.

The project is a joint venture with Australian National University, Swinburne University of Technology and the University of Adelaide.

Researchers at the new base hope to compare their results against those of Gran Sasso Underground Physics Laboratory in Italy.

The Commonwealth cash will go towards the excavation and first stage of the lab, expected by the end of 2019.

If the lab is to be used for other activities such as medical research related to cancer and geological erosion, another $5 million is needed to finish the space, Professor Barberio said.

“We hope this extra $5 million will come from the state government,” she said.

“We are in negotiations with the state government. They are very supportive because it will be a very big boost for regional Victoria.”

A spokesman for the state’s Regional Development minister Jaala Pulford said the project was indefinitely postponed after the sale of the gold mine in 2017.

But the minister wrote to the proponents in February to encourage them to develop a business case for the government’s consideration.