KiwiRail has bowed to pressure and agreed that a new multi-use ferry terminal should be built at the current Interislander site in Kaiwharawhara.
KiwiRail wanted the terminal - which could be expanded to include the Bluebridge ferries - to be closer to town.
This was rejected by the city and regional councils, and all other harbour users.
KiwiRail chief operating officer David Gordon told a Wellington City Council meeting this morning its focus is now on developing the new Kaiwharawhara terminal.
He said its current terminal infrastructure was crumbling and its ferries were old and the project must push ahead at speed.
The project has a $1 billion price tag, and the clock is ticking with two new supersized ferries - three times the size of existing Interislander vessels - due to arrive in the next four to five years.
Greater Wellington Regional Council chairperson Daron Ponter said KiwiRail had made a significant turnaround.
He said the councils should now go the government and ask for the project to be fast-tracked so as to avoid the full RMA process.