The eight-part series based on Fritz Lang's 1927 feature will be filmed by Universal Studio Group and its local outfit Matchbox, with most of the filming at Docklands Studios in Melbourne.
The production will be based on new virtual production technology with massive high tech digital screens, called LED volumes.
The technology was recently used in the Star Wars series The Mandalorian, to display realistic backgrounds and effects on a large scale.
The federal government has promised $83 million, with the state tipping in $41 million for the project.
The funding will support the filming of Metropolis as well as two future projects.
It's expected the Metropolis deal alone will mean 2000 jobs for local actors and production staff.
"The Australian film sector has significant capability, our cast and crew are well regarded around the world," Arts Minister Paul Fletcher told ABC Radio on Thursday.
It's hoped the spending will attract a pipeline of big-budget international films to Melbourne, with the completion of the $46 million sound stage six at Docklands already attracting the Robbie Williams biopic Better Man.
The federal funding package includes another $5 million to train students from the Victorian College of the Arts to use the LED screen technology.
Shooting is expected to begin early next year.
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