Transport Scotland says a rail link with new stations at Cameron Bridge and Leven together with improved bus services as well as cycling and walking facilities emerged as the best-performing options in the Levenmouth Sustainable Transport Study.
With a population of 33,000, Levenmouth is the largest urban area in Scotland without a station.
The project will use the mothballed line from Thornton Junction to Methil, which was last used by freight trains in 2001.
Design and construction costs for the project are estimated to be around £70m.
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